Does a Fixed Return Investment Satisfy the Common Enterprise Prong?

A fixed return investment generally complicates the satisfaction of the common enterprise prong, especially under horizontal commonality. If returns are fixed, there is no sharing of profits and losses in a pro-rata manner among investors.

However, the investment could still satisfy vertical commonality if the fixed return is dependent on the success or managerial efforts of the promoter. The key is whether the investment's fate is inextricably linked to the promoter's performance.