January 21, 2019

Did The Last Viking Sell Securities?

I have recently been reading Stephen R. Bown's book, The Last Viking: The Life of Roald Amundsen.  Readers may recall that it was the Norwegian Amundsen who famously beat the Englishman Robert Falcon Scott to the South Pole in what the press ex post facto reported as a race.  Tragically, Scott and four of his companions died on their own return from the Pole.

Amundsen went on to organize a number of expeditions involving the North Pole, including two unsuccessful attempts to fly to or over the Pole by airplane.  This was in the 1920s, so aviation was still very new. 

As a private adventurer, Amundsen need to fund his expeditions.  One method was to pre-sell post cards with a specially designed stamp.  Amundsen took these cards as a special form of airmail.  Being a securities lawyer, I began to ponder whether these post cards might be construed as "securities" under the famous investment contract test enunciated by the Supreme Court in S.E.C. v. W.J. Howey Co., 328 U.S. 293 (1946):

"The test is whether the scheme involves an investment of money in a common enterprise with profits to come solely from the efforts of others. If that test be satisfied, it is immaterial whether the enterprise is speculative or non-speculative or whether there is a sale of property with or without intrinsic value."

In the case of Amundsen's post cards, the public was definitely investing money in a common enterprise.  The card purchasers' money, moreover, was pooled into a venture in which they all shared the risk of success or failure (whether Amundsen succeeded in carrying the mail).  One might debate whether there was an expectation of profits.  While some purchasers might simply have looked forward to the thrill of a unique method of delivery, it seems likely that the post cards would attain substantial value if Amundsen succeeded. 

In any event, Amundsen needn't have worried about a call from the enforcement division of the Securities and Exchange Commission because it didn't then exist.

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About this Author

Keith Paul Bishop, Corporate Transactions Lawyer, finance securities attorney, Allen Matkins Law Firm

Keith Paul Bishop is a partner in Allen Matkins' Corporate and Securities practice group, and works out of the Orange County office. He represents clients in a wide range of corporate transactions, including public and private securities offerings of debt and equity, mergers and acquisitions, proxy contests and tender offers, corporate governance matters and federal and state securities laws (including the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Act), investment adviser, financial services regulation, and California administrative law. He regularly advises clients...