b'So What if You Are Selling Securities?Federalandstatedefinitionsofsecuritiesincludetheterm investmentcontract.Thedefinitionofaninvestmentcontractisan investment of money in a common enterprise, with an expectation of profits basedsolelyontheeffortsofthepromoter(SecuritiesandExchange Commission v. W.J. Howey Co., 328 U.S. 2931946). A typical investment contract may be an operating agreement for a manager-managedlimitedliabilitycompany,alimitedpartnership agreement, a corporate shareholders agreement or a trust agreement with multiple beneficiaries. In each of these entities, there is an asset manager and passive investors. The sale of securities (i.e., investment contracts) must be registered (pre-approved by securities regulators) such as in a public offering, unless the securities or the transaction is exempt from registration. To follow a securities exemption, the asset manager must first decide which exemption is applicable and then have the appropriate documents drafted on behalf of the issuing entity. It is up to the asset manager (and each of its members) to document how they followed the rules for the exemption. Typicalrulesforsecuritiesexemptionsmayincludeadvertising restrictions, limits on who can invest (financial or geographic) or limits on the number of investors, and they usually require disclosure of the risks of the investment through a disclosure document. Investors often dont want to know they are selling securities (many are in denial), because they have heard that the rules are complex or that its too 32'