Howey TEST is the test that is defined to determine whether a transaction falls within the scope of an investment contract. It requires a person: “We therefore decide that the petitioner`s activity or scheme constitutes an investment contract which constitutes a guarantee under R.A. No. 8799. Therefore, it must be registered with the public respondent, the SEC, prior to its sale or offer for sale or distribution to the public. Since the petitioner did not register the same thing, his offer to the public was rightly approved by the public respondent, the SEC. The CDO was correct, even in the absence of fraud. As an investment contract which is a security under R.A. no. 8799, it must be registered with the public respondent SEC, failing which the SEC will not be able to protect the invested public against fraudulent securities. Strict securities regulation is based on the principle that capital markets depend on the confidence of the public invested in the system. (Power Homes Unlimited Corporation vs.

Securities and Exchange Commission, G.R. No. 164182, February 26, 2008, [Puno, C.J.], citing the U.S. cases of SEC vs. W.J.Howey Co. and SEC vs. Glenn W. Turner Enterprises, Inc.

et al) 4. In the first place, the efforts of others are drawn from above all else. It is a contract, transaction or scheme (set of “contracts”) in which a person invests their money in a joint venture and is led to expect profits in the first place thanks to the efforts of others. (R.A. 8799). . . . .

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