Joan enjoys cross stitching, and her husband, John, makes items using a woodwork

Question

Joan enjoys cross stitching, and her husband, John, makes items using a woodworking process. They would like to make more items and open a small shop selling their handiwork, but they need additional capital with which to purchase raw materials, rent space, and advertise. Joan and John discuss the idea with their neighbors during the annual neighborhood picnic. A number of the neighbors say that they would like to invest in the project. This was entirely the initial idea of the neighbors, and Joan and John did not coerce them in any way. Joan and John, however, quickly draw up contracts that the neighbors signed providing that each investor would receive a certain interest in the shop. An attorney who lived in the neighborhood and specialized in family law asked if there were some laws that John and Joan needed to satisfy in order to seek investors. The neighborhood consensus, however, was that, so long as no one was misled and acted voluntarily, no problem existed. John and Joan proceeded with the shop and made a significant amount of profit. Disagreements arose among the neighbors, however, regarding exactly who was entitled to what. s Retr t at ratthch thth pplicaion o to li and Joan's situation? a. The arrangement with the neighbors was at the suggestion of the neighbors; and federal security law would, therefore, not apply securities law would not apply. would apply b. Contracts such as those involved with the neighbors would not be considered securities and, therefore, federal c. Contracts such as those involved with the neighbors appear to be securities; but state law, not federal law, d. Contracts such as those involved with the neighbors would be considered securities; and, therefore, federal 16

Explanation / Answer

1) Solution: Contracts such as those involved with the neighbours would be considered securities; and, therefore, federal securities law would apply.

Explanation: Since the neighbours signed the contract thus would be considered securities; and, thus federal securities law would apply.

2) Solution: Although state securities laws, called blue sky laws, have been pre-empted in some respects, they remain viable in other respects; and state law should be consulted to ensure compliance

Explanation: Since the neighbours signed the contract thus would be considered securities; and, thus federal securities law was applicable. Also they had a consensus until none was misled and all acted voluntarily but when disagreements arose state law must be consulted to ensure compliance

Related Questions

Navigate

• Browse (All)
• Browse J
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.