CAPITAL-RISK TEST

capital-risk test.Securities. A method of determining whether a transaction constitutes an investment contract (subject to securities laws), whereby if a substantial portion of the capital used by a franchiser to start its operations is provided by a franchisee, then the transaction is treated as an investment contract. [Cases: Securities Regulation  5.10. C.J.S. Securities Regulation §§ 3, 9–10, 33.] [Blacks Law 8th]