A Promissory Note Evidencing Commercial Indebtedness Is Not a Security Nor Is Its Issuance a Purchase or Sale Within the Meaning of the Securities Exchange Act of 1934
Dawson, William B.
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The United States District Court for the Northern District of Texas in the case McClure v. First National Bank held that a promissory note securing an ordinary commercial loan was not a security within the meaning of the Securities Exchange Act of 1934, resulting in a dismissal of the claim. The author examines the McClure court’s decision and concludes that a note has been judicially determined to be as security when its maturity is over nine months, and the issuance of a promissory note has been rules a purchase or sale. As a result, the Fifth Circuit Court of Appeals should reverse the holding of McClure and hold that the issuance of a promissory note evidencing commercial indebtedness and having a maturity of over nine months is a transaction “in connection with the purchase or sale of a security” within the meaning of the securities Exchange Act of 1934.