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Securities and Exchange Commission v. W. J. Howey Co.

United States Supreme Court
328 U.S. 293 (1946)

Securities and Exchange Commission v. W. J. Howey Co.


W. J. Howey Co. (Howey) (defendant) is a Florida corporation that plants and sells orange groves. Howey-in-the-Hills Service, Inc. (Service), which is under common management with Howey, services orange groves in a large-scale farming operation. In order to raise money, Howey sold tracts of land to individuals. At the time of the sale, the buyers, who were typically not farmers or even residents of the state, were offered contracts for the maintenance of the groves by Service. Eighty-five percent of the buyers signed service agreements. Service had near-total control of the property and the operations. The purchasers would then share in the profits from the sale of oranges. The Securities and Exchange Commission (plaintiff) brought an action against Howey for using interstate commerce to offer and sell unregistered securities in violation of § 5(a) of the Securities Act of 1933 (SEA). Howey argued that it was not offering a security. The district court and Fifth Circuit Court of Appeals agreed. The SEC then petitioned for certiorari to the United States Supreme Court, which was granted.

Rule of Law


Holding and Reasoning (Murphy, J.)

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