Securities Regulation—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

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.