Commercial Law, 2010 Bar — Question III-A

ESSAY

Andante Realty, a marketing company that promotes and facilitates sales of real property through leverage marketing, solicits investors who are required to be a Business Center Owner (BCO) by paying an enrollment fee of $250. The BCO is then entitled to recruit two other investors who pay $250 each. The BCO receives $90 from the $250 paid by each of his recruits and is credited a certain amount for payments made by investors through the initial efforts of his Business Center. Once the accumulated amount reaches $5,000, the same is used as down payment for the real property chosen by the BCO. Does this multi-level marketing scheme constitute an “investment contract” under the Securities Regulation Code? Define an “investment contract.”

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