What Is the Significance of the ‘Solely’ Modifier in the Fourth Prong of the Howey Test?

The fourth prong, "derived solely from the efforts of others," has been broadened by US courts. The term 'solely' is no longer interpreted literally; courts now typically read it to mean 'primarily' or 'substantially.' This is significant because it allows the Howey Test to apply even if investors have some minimal involvement (e.g. voting rights).

The focus remains on whether the promoter's managerial efforts are the dominant factor in the investment's success.