When you hear "purchasing a security," you automatically think of public offerings (this is where people purchase stocks of a publicly held company). Yes, publicly-traded stocks are securities, but they are not the only securities available. The word security has a broad meaning. It encompasses, among a host of other investment vehicles and instruments, stocks, treasury stock, notes, debentures, interests in oil and gas wells, and mineral rights, among others.
But how do you know whether something is a security under the Securities Act? The answer is pretty simple, the Howey Test. The Howey test is used to determine, using three elements, whether a product meets the definition of "Security" under federal securities laws. Read on for more insight on this issue.