Howey test

Meaning

Proper Noun

• A test to determine whether an instrument qualifies as an "investment contract" for the purposes of the Securities Act of 1933: it must be "a contract, transaction or scheme whereby a person invests his money in a common enterprise and is led to expect profits solely from the efforts of the promoter or a third party".

Origin

• Established as a result of the US legal case SEC v. W. J. Howey Co. (1946).