Investors in certain condominium units asked the United States Supreme Court to review a federal appeals court’s conclusion that the sale of the units, when coupled with a separate rental-management agreement, were not securities under state or federal law.  See Salameh v. Tarsadia Hotel, U.S., No. 13-763, 12/24/13.  The plaintiffs believe this was an “investment contract” security.  The SEC agrees with the investors.

The plaintiffs purchased condominium units, and signed a rental-management agreement, required under the terms of the purchase contract.  The plaintiffs alleged that these contracts were an investment contract security since they had no control over their units and expected a profit only through the efforts of others.  However, both the district court and the United States Court of Appeals for the Ninth Circuit rejected this argument.

In short, this question needs to be addressed by the Supreme Court, and we will continue to monitor it.