Effective January 11, 1983, the Commodity Exchange Act was amended to afford the states authority to take action, under the Blue Sky Laws or otherwise, against fraud in the sale of commodities which do not occur on regulated exchanges.

  Under the Securities Act of Arizona, the sales of certain commodities which do not require delivery to the purchaser within 28 days of payment of any portion of the purchase price are defined as securities.

  The result of this provision is that such transactions are subject to the regulatory provisions of the Arizona Securities Act.  It is felt that the disclosure requirements and review associated with registration will reduce investor losses as a result of fraud in this area.   Individuals engaging in any form of deferred delivery transactions are invited to come in and discuss registration and the law in this area.

  [What Constitutes Security]

  In the meantime, the issue of what constitutes a security in other areas continues to confront the Division.  Sellers seeking to avoid disclosure requirements under the Act continue to be creative in putting together programs which, they argue, do not fall within the definition of a security.  The most common tact is to utilize “third parties” to provide managerial efforts for investors.   The Division views transactions in the context of their economic substance, rather than form.

Securities Bulletin, Fall 1983.