A security is an investment contract that creates a fiduciary duty. The common types of security are equity securities, debt securities, and derivative securities. Stocks are an example of equity security, whereas loans are an example of securitized debt. Securities are traded on the secondary market and make markets more efficient. In Securities and Exchange Commission v. W.J. Howey Co., the court held that the sale of land was considered an investment contract, which is subject to the Securities Act of 1933 and other Securities and Exchange Commission (SEC) regulations. Today, the Howey test is used to disambiguate whether a particular transaction meets the requirements to be an investment contract.
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