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NEW QUESTION: 1
George Geek is a computer programmer who tired of working for others and started his own company. He
convinced forty investors that he could design software that would rival Microsoft, and sold them each a
1 0% partnership interest in his firm for $25,000. He designed and printed up the partnership certificates
himself. George told the investors that he had a product that was on the verge of being marketable and
that when it did-within the next two months-revenues would pour into the company, and he would begin
paying dividends. He told them they could expect a 20% return on their money this year, with even higher
returns in the years to come. As it turned out, George wasn't quite the programmer he thought he was,
and he wasn't able to get all the bugs out of the program to make it marketable within the promised two
months. Within a year, George had tired of the project and was too busy picking up chicks in his new
Corvette when he wasn't on the island of St. Bart overseeing the construction of his new beach
mansion-and picking up chicks. His activities, of course, were financed by the extremely generous
"salary" he paid himself from the investors' monies. Under the Uniform Securities Act, do the investors
have any civil claims against George?
A. Yes. They can sue George for the return of their original investment, plus interest. George would
B. No. It wasn't George's fault that he was unable to do what he promised. Even if it wasn't for
C. Yes. They can sue George for the return of their original investment, plus interest. George would also
have to pay their court costs and attorneys' fees and any amounts assessed by the court for "pain and
suffering" on the parts of the clients.
D. No. The Uniform Securities Act only involves securities laws and partnership interests are not
Yes. The investors have a civil claim against George under the Uniform Securities Act and
can sue for the return of their original investment, plus interest, reasonable attorneys' fees, and court
costs. There is no provision for pain and suffering. Partnership interests fall under the definition of
securities, so the Uniform Securities Act does apply, and George sold the interests illegally. As securities,
they were required to be registered with the state before they could be sold.
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