The Law According To Moses – What is a Security?
By Ambrose Moses, III
Cynthia has been in business as a child daycare provider since 2009. By 2012, she had outgrown her home and wanted to move the business into some available space in a local shopping center.
She decided to incorporate and be more official in her operations. To save money, Cynthia filled out the forms with the secretary of state and filed them herself.
Next, she wrote up a business plan describing her idea. Cynthia then started emailing her business plan to family members, friends, parents of the children she watched, and a few other people who she thought “had money”.
Cynthia asked them all to invest in her business and promised to give them their money back with interest.
Cynthia was shocked when one of the parents, who worked as a paralegal, told her that the email and business plan thing might be violating state and federal securities laws.
What is a security?
When a business or venture issues ownership interests (such as stock or partnership interests), debt obligations (such as bonds or promissory notes) or otherwise seeks to raise money by promising a return to investors, the federal and state securities laws apply.
The Ohio Securities Act (the “Act”) is set out in Ohio Revised Code Chapter 1707. The Act is administered and enforced by the Ohio Division of Securities and applies to all sales of securities in Ohio.
Sale is broadly defined to include every disposition, and every attempt to dispose, of a security.
Security is broadly defined to include typical instruments like stocks, bonds, options and promissory notes, and also includes instruments that constitute investment contracts.
As Cynthia looks to expand her business and raise funds from investors, it might be a good idea to discuss such plans with an attorney that will help insure she is in compliance with applicable laws, rules, and regulations.
For more information contact Ambrose Moses, III, an attorney with Moses Law Office. Email: info@MosesLaw.pro. Telephone: (614) 418-7898.
