SEC v. Edwards, 540 U.S. 389, 2 (2004)

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the countless and variable schemes devised by those seeking to use others' money on the promise of profits. Id., at 299. The profits this Court was speaking of in Howey are profits—in the sense of the income or return—that investors seek on their investment, not the profits of the scheme in which they invest, and may include, for example, dividends, other periodic payments, or the increased value of the investment. There is no reason to distinguish between promises of fixed returns and promises of variable returns for purposes of the test, so understood. In both cases, the investing public is attracted by representations of investment income. Moreover, investments pitched as low risk (such as those offering a "guaranteed" fixed return) are particularly attractive to individuals more vulnerable to investment fraud, including older and less sophisticated investors. Under the reading respondent advances, unscrupulous marketers of investments could evade the securities laws by picking a rate of return to promise. This Court will not read into the securities laws a limitation not compelled by the language that would so undermine the laws' purposes. Respondent's claim that including investment schemes promising a fixed return among investment contracts conflicts with precedent is mistaken, as no distinction between fixed and variable returns was drawn in the blue sky law cases that the Howey Court relied on, and no post-Howey decision is to the contrary, see United Housing Foundation, Inc. v. Forman, 421 U. S. 837, 852-853. Dictum suggesting otherwise in Reves v. Ernst & Young, 494 U. S. 56, 68, n. 4, was incorrect. The SEC has consistently maintained that a promise of a fixed return does not preclude a scheme from being an investment contract. The Eleventh Circuit's alternative holding, that respondent's scheme falls outside the definition because purchasers had a contractual entitlement to a return, is incorrect and inconsistent with this Court's precedent. Pp. 393-397. 300 F. 3d 1281, reversed and remanded.

O'Connor, J., delivered the opinion for a unanimous Court.

Solicitor General Olson argued the cause for petitioner. With him on the briefs were Deputy Solicitor General Kneedler, Matthew D. Roberts, Meyer Eisenberg, Jacob H. Stillman, and Susan S. McDonald.

Michael K. Wolensky argued the cause for respondent. With him on the brief was Ethan H. Cohen.*

*Briefs of amici curiae urging reversal were filed for AARP by Stacy Canan, Deborah M. Zuckerman, and Michael R. Schuster; for the North American Securities Administrators Association, Inc., by Mark J. Davis;

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