FSC was a securities brokerage firm that sold limited partnership interests to Mark and 27 other investors. All investors executed a subscription agreement in which they revealed their income and represented that they had had the opportunity to review relevant information, including risk factors, and were sufficiently knowledgeable and savvy to understand the implications of the investment. However, FSC managers never actually reviewed the completed subscription agreements, and all who applied to be investors were admitted.

When the interests dropped in value, Mark sued to rescind the contract on the basis that the limited partnerships were securities and were not registered. FSC defended that the offering was not a security.

CASE QUESTIONS

1. Should Mark prevail?

2. Is it relevant that FSC never reviewed the subscription agreements?