Dr. Floss has just earned his dental degree and wants to establish a private dental practice. He has had a bit of sticker shock at the price of all the equipment this will require him to purchase. Because he still has a large student loan to repay, he has been unable to borrow any money from his financial institution. To raise capital, he decides to sell fifty ownership interests of $1,000 each to interested investors and takes out a full page ad in a local newspaper to advertise this investment. In this scenario:
Explanation
Answer: C - If Dr. Floss offers fifty ownership interests of $1,000 each for sale to interested investors, he has violated the provisions of the Securities Act of 1933, which requires that new securities be registered unless they are exempt from registration, and may face civil penalties. There is no evidence that he has made any misrepresentations or otherwise attempted to defraud investors, so he is not subject to criminal fraud charges. The ownership interests do fall under the definition of a security.
