Securities Regulation

Common Enterprise

For an endeavor to be a common enterprise, there must be one of three types of commonality:

• Horizontal Commonality

  Horizontal commonality exists when there is a pooling of investors' funds.

• Strict Vertical Commonality

  Strict vertical commonality is present when the promoters and the investors actually share the risk of the investment.

• Broad Vertical Commonality

  Broad vertical commonality is present when there is a connection between the efforts of the promoters and the collective successes and losses of the investors.

  This is probably not correct because it is basically the same thing as the "efforts of others" element of the Howey test.

Different states accept different types of commonality.