Chan v. Hei Resources, Inc. - The Continuing Saga of Joint Venture Interests as Securities

Abstract

Colorado federal and state courts have many times considered whether joint venture interests offered to participants for oil and gas development are securities subject to regulation under federal and state securities laws. In some cases the investments have been treated as co-tenancies; in other cases they have been treated as securities subject to regulation under the Colorado Securities Act (the “CSA”) and federal law. In Colorado, the most prominent, heavily battled, and longest-lasting of these cases is Joseph/Rome/Chan v. HEI Resources, Inc., which commenced its legal battles in 2002.

The Colorado Supreme Court issued its first opinion in this case on June 27, 2022 following opinions by two divisions of the Colorado Court of Appeals, the trial court three times, and an early (2002) decision by the Securities Commissioner in a cease-and-desist action.

Keywords: securities, williamson v. tucker, economic realities, enforcement, definition of a security

JEL Classification: K00, K22, K29, K40