Respondent Ruefenacht (hereinafter respondent) purchased 50% of the stock of a company whose president previously had owned all of the stock. Respondent allegedly purchased the stock in reliance on financial documents and oral representations made by various individuals, including petitioner Gould, the companys corporate counsel. Part of the consideration for the deal was respondents promise that he would participate in the companys management, which he did, but his actions were at all times subject to the presidents veto. Respondent subsequently began to doubt the accuracy of some of the representations that had been made to him. He ultimately filed suit in Federal District Court, alleging violations of, inter alia, the Securities Act of 1933 and the Securities Exchange Act of 1934. The court granted summary judgment for the defendants, holding that the stock respondent purchased was not a "security" within the meaning of the Acts, and that the "sale of business" doctrine prevented application of the Acts. The Court of Appeals reversed.

Held:

The stock