Full opinion text
ORDER SAM, District Judge. The court has before it the Report and Recommendation of the magistrate judge dated February 25, 1992. There was no timely objection to the Report and Recommendation, other than that filed by the Moench defendants, who have since been dismissed from the case. The court, having reviewed the matter de novo, concurs with the Report and Recommendation of the magistrate judge. The Report and Recommendation contains alternate recommendations with respect to plaintiffs’ 12(1) claim. For purposes of this case, the court adopts the magistrate judge’s alternate recommendation regarding plaintiffs’ 12(1) claim that the relevant offering occurs at the time the securities were last offered to the public. Although the court, for the specific purpose of this case, adopts the alternate recommendation of the magistrate judge, the court is of the view that the Report and Recommendation offers guidance on the issue of whether unregistered securities are, or are not, bona fide offered. The court considers the analysis presented to be extrinsic to the thrust of the briefing and arguments of counsel; however, the thorough, scholarly treatment of this question by the magistrate judge may prove beneficial to other litigants and courts when this question arises in the future. Accordingly, with the foregoing observations and the reasons stated, the court adopts the Report and Recommendation of the magistrate judge dated February 25, 1992 as the court’s own opinion. BOYCE, United States Magistrate Judge. Plaintiffs are the purchasers and present owners of thrift certificates, savings passbook, or other accounts issued by the now defunct Copper State Thrift & Loan (CST & L), a Utah industrial loan corporation. Defendants are Copper State Financial Corporation (CSFC) which owned all CST & L stock, individual stockholders of CSFC, and individual directors and officers of CST & L and CSFC. Plaintiffs allege that defendants violated provisions of federal and Utah law including the Securities Act of 1933, the Securities Exchange Act of 1934, the Utah Uniform Securities Act, the Racketeer Influenced and Corrupt Organizations Act (RICO), and the Utah Racketeering Influences and Criminal Enterprise Act (RICE). In addition, plaintiffs allege common law fraud and negligence. The case was referred to the magistrate judge under 28 U.S.C. § 636(b)(1)(B). Defendants filed a motion to dismiss for failure to state a claim upon which relief can be granted under Rules 12(b) and 9(b) of the Federal Rules of Civil Procedure. Pursuant to the magistrate judge’s recommendation, the court denied the motion except as to plaintiffs’ claim under section 17(a) of the Securities Act of 1933. The court dismissed plaintiffs’ section 17(a) claim. Bradford v. Moench, 670 F.Supp. 920 (D.Utah 1987). After their motion was denied, defendants Lorin L. Moench, Richard Moench, and Moench Investment Co., Ltd. filed a motion for summary judgment (File entry no. 184), which was joined by defendant Robert Beckstead (File entry no. 189). Thereafter, plaintiffs Ernest R. Gates, Linda Gates, Michael W. Edwards, Debra Edwards, Theodore Scharrier, and Marianne Scharrier filed a motion for partial summary judgment against defendant Beck-stead on the issue of liability under section 12(1) of the 1933 Act. (File entry no. 199.) This report and recommendation is submitted pursuant to the reference on the cross-motions for summary judgment. I. STANDARD FOR SUMMARY JUDGMENT Summary judgment should be entered if the record shows that “there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Fed.R.Civ.P. 56(c). A party moving for summary judgment bears the initial burden of informing the court of the basis of its motion. It may do so by identifying portions of the record that demonstrate that there is no genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). In response, the nonmoving party must “make a showing sufficient to establish the existence of an element essential to that party’s case, and on which that party will bear the burden of proof at trial.” Id. at 322, 106 S.Ct. at 2552. If the nonmoving party fails to meet this burden, summary judgment is mandated. Id. In such a ease, no genuine issue of material fact exists because a complete failure of proof of an essential element of the party’s claim necessarily renders all other facts immaterial. Id. at 322-23, 106 S.Ct. at 2552-53. II. ABSTENTION Defendants ask the court to abstain from hearing plaintiffs’ claims. In support of their request, defendants cite Burford v. Sun Oil Co., 319 U.S. 315, 63 S.Ct. 1098, 87 L.Ed. 1424 (1943), for the proposition that “federal courts decline to exercise jurisdiction in order to avoid needless conflict with the administration by the state of its own affairs.” (See Defs.’ Mem.Supp.Summ.J. at 29-31, file entry no. 186; Defs.' Reply Mem. at 28-33, file entry no. 214; Defs.’ 2d Suppl.Mem. at 11 n. 2, file entry no. 245.) As additional support for their abstention argument, defendants cite Brandenburg v. Seidel, 859 F.2d 1179 (4th Cir.1988) in which the Fourth Circuit upheld, on the basis of the Burford doctrine, a district court’s decision to abstain from considering federal RICO and pendent state claims against state financial institutions. Noting that the Maryland legislature had set up a comprehensive system to rehabilitate and liquidate the ailing savings and loans, the Fourth Circuit stated that the liquidation process would be greatly impeded if more than one decision-making authority was involved. Brandenburg v. Seidel, 859 F.2d at 1191. In the court’s view, the federal proceedings would disrupt the state effort to provide a unified method for liquidation by interfering with the receiver’s efforts to marshal assets and by undermining previous orders of the state receivership court. Id. at 1191-92. See also Tafflin v. Levitt, 865 F.2d 595, 599-600 (4th Cir.1989) (upholding a similar abstention decision), aff'd as to unrelated issue, 493 U.S. 455, 110 S.Ct. 792, 107 L.Ed.2d 887 (1990). According to defendants, Utah has set up a system for resolving the thrift crisis substantially similar to Maryland’s. Based on the Brandenburg decision and the Burford doctrine, defendants argue that this court should also abstain from hearing plaintiffs’ claims in this case. Federal courts have an obligation to adjudicate claims within their jurisdiction. New Orleans Pub. Serv., Inc. v. Council of City of New Orleans (NOPSI), 491 U.S. 350, 356-60, 109 S.Ct. 2506, 2512-13, 105 L.Ed.2d 298 (1989); Deakins v. Monaghan, 484 U.S. 193, 203, 108 S.Ct. 523, 530, 98 L.Ed.2d 529 (1988); Cohens v. Virginia, 19 U.S. (6 Wheat) 264, 404, 5 L.Ed. 257 (1821). Although abstention is permissible in some cases, it remains the exception, not the rule. NOPSI, 491 U.S. at 358, 109 S.Ct. at 2513; Hawaii Hous. Auth. v. Midkiff 467 U.S. 229, 236, 104 S.Ct. 2321, 2326, 81 L.Ed.2d 186 (1984); Colorado River Water Conserv. Disk v. United States, 424 U.S. 800, 813, 96 S.Ct. 1236, 1244, 47 L.Ed.2d 483 (1976). In Burford v. Sun Oil Co., a federal district court was faced with a due process challenge to the validity of an order by the Texas Railroad Commission granting a permit to drill four oil wells. Burford, 319 U.S. at 316-17, 63 S.Ct. at 1099. Although the constitutional question was of minimal federal importance, the case required the court to determine whether the Commission had properly applied Texas’s complex oil and gas regulations. Id. at 331 & n. 28, 63 S.Ct. at 1106 & n. 28. In addition to conserving an important natural resource, uniform regulation of the oil fields was very important to the Texas economy. Id. at 320, 63 S.Ct. at 1100. Because of the importance and complexity of the Texas regulatory scheme, and to prevent the confusion caused by multiple review of the same general issues, the Texas legislature had provided for centralized judicial review of the Commission’s decisions in the state courts of Travis County. As a result, the Travis County courts had developed a certain expertise in dealing with problems of oil and gas regulation. Id. at 325-27, 63 S.Ct. at 1103-04. Because federal district courts were relatively unsophisticated in these matters, federal review of the Commission’s decisions had resulted in confusion, delay, misunderstanding of state law, and needless conflict with state policy.- Id. at 327, 63 S.Ct. at 1104. Noting that intervention by lower federal courts was almost certain to result in conflicts in the interpretation of state law which would be dangerous to the success of state policies, the Supreme Court concluded that abstention was appropriate. Id. at 334, 63 S.Ct. at 1107. In NOPSI, decided shortly after Brandenburg and Tafflin, the Supreme Court attempted to clarify the Burford doctrine: Where timely and adequate state court review is available, a federal court sitting in equity must decline to interfere with the proceedings or orders of state administrative agencies: (1) when there are “difficult questions of state law bearing on policy problems of substantial public import whose importance transcends the result in the case then at bar”; or (2) where the “exercise of federal review of the question in a case and in similar cases would be disruptive of state efforts to establish a coherent policy with respect to a matter of substantial public concern.” NOPSI, 491 U.S. at 361, 109 S.Ct. at 2514 (quoting Colorado River, 424 U.S. at 814, 96 S.Ct. at 1244. The Court stated that abstention is not required simply because a complex state regulatory scheme exists, even if there is a potential for conflict with state regulatory law or policy. NOPSI, 491 U.S. at 360, 109 S.Ct. at 2514; Colorado River, 424 U.S. at 815-16, 96 S.Ct. at 1245-46. Under the rationale of Burford and NOPSI, there is no reason for this court to stay its hand. In the first place, the Bur-ford doctrine arguably does not apply to this case. In both Burford and NOPSI, the federal court was required to review a decision of a state administrative agency. Unlike those cases, this court is not called upon to interfere with the proceedings or orders of a state administrative agency. Moreover, there are no difficult questions of state law at issue in this case. As was the situation in NOPSI, plaintiffs’ federal claims are not “in any way entangled in a skein of state law that must be untangled before the federal case can proceed.” NOPSI, 491 U.S. at 361, 109 S.Ct. at 2514 (quoting McNeese v. Board of Educ. for Community Unit School Dist. 187, 373 U.S. 668, 674, 83 S.Ct. 1433, 1437, 10 L.Ed.2d 622 (1963). Finally, federal review of the questions presented will not disrupt state efforts to establish coherent policy with respect to the thrift industry. As previously stated, abstention is not required simply because a state regulatory scheme exists. NOPSI, 491 U.S. at 360, 109 S.Ct. at 2514; Colorado River 424 U.S. at 815-16, 96 S.Ct. at 1245-46. Accordingly, the court should not abstain from exercising jurisdiction in this case. III. DEFINITION OF “SECURITY” In the prior report and recommendation, the magistrate judge observed that the “linchpin” of plaintiffs’ case is whether the instruments at issue are “securities” within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. Bradford, 670 F.Supp. at 930. The fundamental purpose of the Securities Acts was to eliminate serious abuses in the securities markets. Reves v. Ernst & Young, 494 U.S. 56, 60, 110 S.Ct. 945, 949, 108 L.Ed.2d 47 (1990); United Hous. Found. Inc. v. Forman, 421 U.S. 837, 849, 95 S.Ct. 2051, 2059, 44 L.Ed.2d 621 (1975). To accomplish that goal, Congress defined the term “security” broadly to encompass the many instruments that might be sold as an investment. Reves, 494 U.S. at 60, 110 S.Ct. at 949. However, Congress did not intend to provide a broad federal remedy for fraud. Id.; Marine Bank v. Weaver, 455 U.S. 551, 556, 102 S.Ct. 1220, 1223, 71 L.Ed.2d 409 (1982). In interpreting the term “security,” courts should consider the economics of the transaction under investigation and take care not to place form over substance. Reves, 494 U.S. at 60, 110 S.Ct. at 949; Tcherepnin v. Knight, 389 U.S. 332, 336, 88 S.Ct. 548, 553, 19 L.Ed.2d 564 (1967). A. The Family Resemblance Test In Reves v. Ernst & Young, 494 U.S. 56, 110 S.Ct. 945, the Supreme Court was faced with the question whether certain demand notes issued by a farmers’ cooperative were “securities” within the meaning of the Securities Exchange Act of 1934. The Court concluded that they were. After considering various tests for determining whether a note is a security, the Court adopted the “family resemblance” test. The Court observed that a majority of the courts that had considered the issue had used an investment versus commercial approach. Under that approach, the court seeks to distinguish between notes issued in an investment context (which are “securities”) and commercial or consumer notes (which are not “securities”). Reves, 494 U.S: at 62, 110 S.Ct. at 950. Noting that the investment versus commercial and family resemblance tests are really two ways of formulating the same general approach, the Court stated that the family resemblance test provides a more promising framework for analysis. Id. 494 U.S. at 64, 110 S.Ct. at 951. Consequently, the Court specifically rejected the investment versus commercial test in favor of the family resemblance test. Id. Under the family resemblance test, a court begins with a presumption that every note is a security. Id. However, the presumption is rebuttable if the note in question bears a strong family resemblance to any of the notes on a judicially created list, deemed not to be securities. Id. The following types of notes are not considered to be securities: (1) consumer-financing notes, (2) notes secured by a home mortgage, (3) short-term notes secured by a lien on a small business or its assets, (4) notes evidencing a “character” loan to a bank customer, (5) short-term notes secured by the assignment of accounts receivable, (6) notes formalizing an open-account debt incurred in the ordinary course of business, and (7) notes evidencing loans by commercial banks for current operations. Id. The Supreme Court provided four factors to be used in determining whether a note resembles any of the listed notes. First, the court should examine the transaction at issue to assess the motivation that would prompt a reasonable buyer and seller to enter into it. If the seller’s purpose is to raise money for a business enterprise or to finance substantial investments and the buyer’s purpose is to make a profit, the instrument is probably a security. Id. at 64-68, 110 S.Ct. at 951-52. Second, the court should consider the plan of distribution of the instrument to determine whether there is common trading in the instrument for speculation or investment. Id. at 66, 110 S.Ct. at 952. Third, the court should examine the reasonable expectations of the investing public. Instruments may be considered to be securities on the basis of public expectations even where an economic analysis of the particular circumstances surrounding a transaction might suggest otherwise. Id. Finally, the court should consider whether “some factor such as the existence of another regulatory scheme significantly reduces the risk of the instrument, thereby rendering application of the Securities Acts unnecessary.” Id. If, based on the foregoing factors, a note does not bear a strong resemblance to one of the enumerated categories, then the court should determine whether another category should be added by examining the same four factors. Id. B. The Holloway Decision In a case decided prior to Reves, the Tenth Circuit Court of Appeals held that thrift certificates and passbook savings certificates issued by a trust company and a finance company were securities within the meaning of the federal securities laws. Holloway v. Peat, Marwick, Mitchell & Co., 879 F.2d 772 (10th Cir.1989), cert. granted and judgment vacated sub nom. Peat Marwick Main & Co. v. Holloway, 494 U.S. 1014, 110 S.Ct. 1314, 108 L.Ed.2d 490 (1990), aff'd on remand, 900 F.2d 1485 (10th Cir.1990), cert. denied, 498 U.S. 958, 111 S.Ct. 386, 112 L.Ed.2d 396 (1990). The court first considered whether the instruments at issue were within the language of the statutory definition of a “security.” Noting that passbook savings certificates and thrift certificates are essentially debt instruments which represent a promise by the issuing entity to repay the principal amount with interest at a specified rate after a specified time period or on demand, the court concluded that they fall within the “notes” or “evidence of indebtedness” categories of the statutory definition. Holloway, 879 F.2d at 776-77. After reaching this conclusion, the court applied the “commercial/investment” test to determine that the instruments were securities. Id. at 779-83. Because the Tenth Circuit had used the commercial/investment test, the Supreme Court vacated the judgment and remanded for reconsideration under the family resemblance test announced in Reves. Peat Marwick Main & Co. v. Holloway, 494 U.S. 1014, 110 S.Ct. 1314, 108 L.Ed.2d 490 (1990). On remand, the Tenth Circuit applied the family resemblance test and affirmed its original opinion. Holloway v. Peat, Marwick, Mitchell & Co., 900 F.2d 1485 (10th Cir.1990). C. Application of the Family Resemblance Test After Reves and Holloway, there can be little doubt that the instruments at issue in this case are securities. The instruments are substantially similar to the instruments at issue in Holloway, and thus fall within the statutory definition of a security. Next, applying the family resemblance test, the court begins with a presumption that the instruments are securities. A comparison with the judicially created list reveals that the instruments at issue bear no resemblance to any of the enumerated instruments. Therefore, the court must apply the four Reves factors to determine whether the certificates and accounts represent a new category of instruments that should be added to the list. 1. Motivation Under the first factor, the court must consider the motivation that would prompt a reasonable buyer and seller to enter into the transaction. If the seller is trying to raise money for general business purposes and the buyer is trying to earn money on an investment, then the instrument is most likely a security. Reves, 494 U.S. at 64-68, 110 S.Ct. at 951-52. Defendants point out that if an instrument is exchanged to advance some commercial or consumer purpose, it is less sensibly described as a security. See Reves, 494 U.S. at 65, 110 S.Ct. at 952. According to defendants, all parties in the instant case referred to the instruments at issue as “savings deposits.” In addition, defendants state that “[cjertain plaintiffs have acknowledged herein their own subjective motivations, namely that the instruments at issue here were commercial savings deposit accounts, not investments.” (Defs.’ 2d SuppLMem. at 4.) In support of this assertion, defendants point to statements by two of the plaintiffs at a thrift depositors’ meeting held on October 28, 1986 to the effect that they were “depositors,” not “investors” or that the transactions were “savings deposits,” not “investments.” (Defs.’ Reply Mem. at 24-25; Tr. of Oct. 28,1986 meeting at 12, 13, ex. 6 attached to Defs.’ Reply Mem.) Further, defendants contend that in the Holloway opinion, the Tenth Circuit considered as a significant factor, the parties’ express disclaimers that the instruments at issue were “deposits.” In Reves, the Supreme Court stated that a transaction should be examined to assess the motivation that would prompt a “reasonable” buyer and seller to enter into it. Reves, 494 U.S. at 64, 110 S.Ct. at 951. The use of the word “reasonable” suggests that an objective standard should be used in assessing motivation. Accordingly, the subjective motivation of a particular buyer is not dispositive, especially in a case like this one with a large number of plaintiffs who probably had many different subjective motivations for buying the instruments. Regarding defendants’ reference to the Holloway opinion, the Holloway court stated that it is appropriate to consider the issuer’s characterization of the instrument in question. Holloway, 879 F.2d at 781. In Holloway, the sellers had characterized the instruments as “investments,” expressly disclaiming that they were “deposits.” Id. The court believed that such a characterization could lead purchasers justifiably to assume that the instruments at issue were subject to the federal securities laws. Id. The court did not address the buyers’ characterization of the instruments. This suggests the unimportance of individual characterizations. In determining whether an instrument is a security, the court must consider the economic realities of a transaction. Reves, 494 U.S. at 60, 110 S.Ct. at 949; Forman, 421 U.S. at 848-49, 95 S.Ct. at 2058-59; Tcherepnin, 389 U.S. at 336, 88 S.Ct. at 553. The Reves Court observed that where an instrument is sold in an effort to raise capital for general operations and purchased in order to earn a profit in the form of interest, “the transaction is most naturally conceived as an investment in a business enterprise rather than as a purely commercial or consumer transaction.” Reves, 494 U.S. at 68, 110 S.Ct. at 952-53. In the instant case, it is undisputed that CST & L’s purpose was to raise money for general use in its operations and for loans to its customers. Although some of the plaintiffs in this case may have labelled the transactions as “deposits,” the natural conclusion is that a reasonable buyer would purchase the thrift certificates or passbook accounts in order to earn interest on an investment, especially since CST & L offered higher than average interest rates on the accounts. (See Anderson Dep., Ex. 3.) Accordingly, under the first Reves factor, the instruments at issue appear to be securities. 2. Plan of Distribution The second factor is the plan of distribution of the instrument. In Reves, the Supreme Court stated that where an instrument is offered and sold to a broad segment of the public, that is all that is necessary “to establish the requisite ‘common trading’ in an instrument.” Reves, 494 U.S. at 68, 110 S.Ct. at 953. The instruments need not be traded on an exchange. Id. See Landreth Timber Co. v. Landreth, 471 U.S. 681, 105 S.Ct. 2297, 85 L.Ed.2d 692 (1985); Tcherepnin v. Knight, 389 U.S. 332, 88 S.Ct. 548; SEC v. W.J. Howey Co., 328 U.S. 293, 66 S.Ct. 1100, 90 L.Ed. 1244 (1946) (cases involving securities not sold on an exchange). In this case, CST & L offered the certificates and accounts to the general public; and at the time CST & L closed, approximately 1400 people owned CST & L certificates or accounts. (Aff. of Julie Deleeuw 1f 4, Ex. I to Pis.’ Mem.Supp.Part.Summ.J., file entry no. 200.) Defendants have not addressed this factor, apparently conceding that the requisite “common trading” in the instruments at issue has been established. 3. Public Expectation or Perception In considering the third factor, the public’s reasonable perceptions, the Court stated that the fundamental essence of a security is its character as an investment. Reves, 494 U.S. at 68, 110 S.Ct. at 953. Noting that the Reves defendants’ advertising had characterized the instruments as “investments,” the Court stated that prospective purchasers were entitled to take the sellers at their word. Id. In the instant case, a CST & L pamphlet stated that CST & L offered “higher-than average interest rates. A good, safe investment.” (Anderson Dep., Ex. 3) (highlighting in original). In addition, a promotional sheet stated that “our Ultra Passbook is one of the best liquid investments around.” (Sutton Dep., Ex. 111.) In their defense, defendants state that the pamphlet was prepared by the Industrial Loan Guarantee Corporation (ILGC), an agency created and monitored by the State of Utah. (Defs.’ 2d Suppl.Mem. at 5). However, the fact that the pamphlet was prepared by ILGC does not exculpate the defendants, especially since defendant Beck-stead was president of ILGC in addition to being president and a director of CST & L. (Beckstead Dep. at 57, 98). Defendants argue that despite the existence of the pamphlet, the critical issue under Reves is whether there were “countervailing factors” that would lead a reasonable person to question the characterization of the instrument as an investment or security. See Reves, 494 U.S. at 68, 110 S.Ct. at 953. According to defendants, countervailing factors in this case require a ruling either that the instruments in question were not securities or that such a determination cannot be made on summary judgment. In support of this contention, defendants refer to the statements by some of the plaintiffs and other depositors at the October 28, 1986 meeting, discussed above, that they were savers, not investors. In addition, defendants state that the Utah statutory provisions which authorized the instruments at issue also expressly excluded them from the definition of thrift securities. See Utah Code Ann. § 7-l-503(3)(a) (1988). Defendants contend that these “countervailing factors” indicate that a reasonable person could not view the CST & L instruments as securities. (Defs.’ 2d Suppl.Mem. at 5-6.) In analyzing this factor, the court must consider the “reasonable” expectations of the investing public. See Reves, 494 U.S. at 66, 68, 110 S.Ct. at 952, 953. This is an objective standard. As previously discussed, the subjective perceptions of some of the plaintiffs is not determinative of whether the instruments were securities. Regarding defendants’ contention that the Utah definition of securities excludes the types of instruments at issue, state law does not define “securities” for purposes of the federal Securities Acts. See Tcherepnin, 389 U.S. at 337-38, 88 S.Ct. at 553-54; Holloway, 879 F.2d at 777 n. 4. See also Reves, 494 U.S. at 70-72, 110 S.Ct. at 954-55 (stating that federal, not state, law governs the “maturity" of notes as that term is used in the federal Securities Acts). Therefore, whether the Utah statute excludes the instruments does not govern the question whether the instruments are securities within the meaning of the federal Securities Acts. Furthermore, no evidence suggests that plaintiffs were aware of the alleged statutory exclusion or that it influenced their perception of the instruments at issue. As discussed above, defendants themselves characterized the instruments as investments. The Tenth Circuit has stated that instruments offered and sold to the general public on the representation that they are good investments are generally deemed to be securities. Holloway, 879 F.2d at 781 n. 8. Moreover, the Supreme Court has stated that it is not inappropriate to judge promoters’ offerings as being what they were represented to be. SEC v. United Benefit Life Ins. Co., 387 U.S. 202, 211, 87 S.Ct. 1557, 1562, 18 L.Ed.2d 673 (1967). Under the circumstances, plaintiffs were entitled to take defendants at their word. See Reves, 494 U.S. at 68, 110 S.Ct. at 953. Thus, analysis of the third factor indicates that the instruments at issue were securities. 4. Risk-reducing Factor The final consideration under the family resemblance test is whether a risk-reducing factor, such as the existence of another regulatory scheme, renders the application of the federal securities laws unnecessary. Reves, 494 U.S. at 66, 110 S.Ct. at 952. In Marine Bank v. Weaver, 455 U.S. 551, 102 S.Ct. 1220, 71 L.Ed.2d 409 (1982), the Supreme Court held that a certificate of deposit issued by a federally regulated bank was not a security. The Court concluded that comprehensive federal regulation of the banking industry made the additional protection afforded by the securities laws unnecessary. In reaching that conclusion, the Court emphasized the importance of the fact that the purchaser of an FDIC-insured certificate of deposit is virtually guaranteed payment in full. Marine Bank, 455 U.S. at 558, 102 S.Ct. at 1224. Defendants point out that the Reves Court referred to the existence of “another regulatory scheme” as a possible risk-reducing factor, but did not expressly require that such a regulatory scheme be federal regulation. (Defs.’ 2d Suppl.Mem. at 6.) See Reves, 494 U.S. at 66, 110 S.Ct. at 952. Defendants argue that in the instant case, the existence of adequate state regulation akin to the federal regulation in Marine Bank supports a conclusion that the instruments at issue are not securities. In addition, defendants point out that unlike the notes at issue in Reves, the instruments in the instant case were insured by the ILGC. Three pre-Reves cases support defendants’ contention. See Tafflin v. Levitt, 865 F.2d at 598-99 (holding that a comprehensive state regulatory and insurance system rendered certificates of deposit issued by a state-chartered savings and loan not securities); Wolf v. Banco Nacional de Mexico, S.A., 739 F.2d 1458, 1463-64 (9th Cir.1984) (holding that Mexican regulatory scheme rendered Mexican bank certificates of deposit not securities), cert. denied, 469 U.S. 1108, 105 S.Ct. 784, 83 L.Ed.2d 778 (1985); West v. Multibanco Comermex, S.A., 807 F.2d 820, 826-27 (9th Cir.1987) (same), cert. denied, 482 U.S. 906, 107 S.Ct. 2483, 96 L.Ed.2d 375 (1987). But cf. Gary Plastic Packaging Corp. v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 756 F.2d 230 (2d Cir.1985) (holding that resale of federally insured certificates of deposit by a broker in the secondary market necessitated the additional protection of federal securities regulation). However, the argument that the existence of a state regulatory scheme can remove an instrument from the definition of a security was expressly rejected by the Tenth Circuit in Holloway. In the first Holloway opinion, the court held that in light of the Supremacy Clause, state regulation is insufficient to displace the federal securities laws. Otherwise, states could create their own exemptions. Holloway, 879 F.2d at 784. The court concluded that Marine Bank permits only other federal regulation to displace the securities laws. Id. Based on its holding that only federal regulation may be considered, the court stated that “no amount of state regulation is sufficient to satisfy the Marine Bank standard.” Id. at 787. On remand, the court acknowledged that Reves did not expressly address whether federal courts should consider state regulation in applying the family resemblance test. Holloway, 900 F.2d at 1488. However, the court observed that Reves did state that the instruments at issue “would escape federal regulation entirely if the Acts were held not to apply." Id. (quoting Reves, 494 U.S. at 69, 110 S.Ct. at 953) (emphasis provided by the Holloway court). The court then reaffirmed its prior holding that the under the Supremacy Clause, state regulatory schemes cannot displace the federal Securities Acts. Holloway, 900 F.2d at 1488. See also Randall W. Quinn, After Reves v. Ernst & Young, When Are Certificates of Deposit “Notes” Subject to Rule 10b-5 of the Securities Exchange Act?, 46 Bus. Law. 173 (1990) (concluding that the Marine Bank exclusion should not be extended to nonfederal regulation). Defendants contend that the Holloway analysis is inappropriate and should not be applied in this case. (Defs.’ Suppl.Mem. at 8.) According to defendants, Holloway is factually dissimilar from the instant case because the state regulation at issue in Holloway was far less comprehensive than the Utah regulatory scheme. Defendants ask the court to reject Holloway or limit it to its own unique facts. Notwithstanding defendants’ arguments, the Tenth Circuit has expressly held that a state regulatory scheme cannot displace the federal securities laws. Holloway, 900 F.2d at 1488. In light of the Holloway decision, the Utah regulatory scheme simply cannot serve as a risk-reducing factor sufficient to render the protection of the federal securities laws unnecessary. Accordingly, the fourth Reves factor also points to a conclusion that the instruments at issue are securities. 5. Conclusion Under the family resemblance test, the instruments at issue are securities within the meaning of the Securities Act of 1933 and" the Securities Exchange Act of 1934. Accordingly, defendants’ motion for summary judgment should be denied on this issue. D. Short-term Exclusion One last comment concerning the definition of securities is in order. Section 3(a)(10) of the 1934 Act excludes from the definition of a security “any note, draft, bill of exchange, or banker's acceptance which has a maturity at the time of issuance of not exceeding nine months____” 15 U.S.C. § 78c(a)(10). Similarly, section 3(a)(3) of the 1933 Act exempts these instruments from coverage. 15 U.S.C. § 77c(a)(3). Although defendants have not contended otherwise, it should be noted that thrift certificates with maturity dates of less than nine months and passbook savings accounts do not fall within the short-term note exclusion of the Securities Acts. In Reves, the Supreme Court held that demand notes do not necessarily have a maturity of less than nine months. The Court explained that demand notes could be viewed as having either an immediate maturity or an indefinite maturity because demand could be made immediately or many years in the future. Reves, 494 U.S. at 72, 110 S.Ct. at 955. In light of the remedial purpose of the statutes, the Court held that the short-term exclusion should not be interpreted to encompass demand notes. Id. In Holloway, the Tenth Circuit stated that the maturity date of an instrument or the demand character of passbook certificates is not dispositive because the short-term exclusion was meant to apply only to prime quality commercial paper of a type not ordinarily purchased by the general public. Holloway, 879 F.2d at 778-79, 782-83, citing Zabriskie v. Lewis, 507 F.2d 546, 550 (10th Cir.1974). Other courts have reached a similar conclusion. See, e.g., SEC v. American Bd. of Trade, 751 F.2d 529, 538-40 (2d Cir.1984); Hunssinger v. Rockford Bus. Credits, Inc., 745 F.2d 484, 492 & n. 1 (7th Cir.1984). See also Quinn, supra at 183-88 (concluding that the short-term exclusion should apply only to certain commercial paper which is not offered to the public as an investment). E. Utah Uniform Securities Act Defendants also argue that plaintiff’s claims under the Utah Uniform Securities Act must fail because the Utah Code specifically excludes the instruments at issue from the definition of securities. (Defs.’ Mem.Supp.Summ.J. at 47-50.) In support of this argument, defendants point to a provision in the Code dealing with the jurisdiction of the Department of Financial Institutions (DFI) to regulate the sale by a financial institution of its own securities which provides as follows: (3) “Security” as used in this section does not include: (a) certificates of deposit or similar instruments issued by a bank, savings and loan association, credit union, or thrift institution authorized or approved by the commissioner under this title____ Utah Code Ann. § 7-1-503 (1988). Defendants contend that section 7-1-503, by its plain terms, vests the DFI with complete jurisdiction over the sale of “securities” by institutions such as CST & L. As plaintiffs point out, the provision cited by defendants applies only to the jurisdiction of the DFI. It does not exclude certificates of deposit or similar instruments from the provisions of the Utah Uniform Securities Act, Utah Code Ann. §§ 61-1-1 to -30. Like its federal counterpart, the definition of “security” in the Utah Uniform Securities Act is broad enough to cover the instruments at issue. See Utah Code Ann. § 61-1-13(18) (1991 Cum.Supp.). Since the definition of securities in the Utah Uniform Securities Act does not exclude the instruments at issue, the court concludes that they are securities within the meaning of the Act. IV. STATUTE OF LIMITATIONS Defendants contend that plaintiffs’ claims under section 12 of the 1933 Act are barred by the statute of limitations. A. Section 12(1) Claims Section 12(1) of the 1933 Act provides a remedy for violations of the Act’s registration requirements. See 15 U.S.C. § 771(1). The statute of limitations applicable to section 12(1) claims is found in section 13, 15 U.S.C. § 77m. Under the statute of limitations, a section 12(1) claim must be brought within one year after the violation upon which it is based, and in no event, more than three years after the securities were “bona fide offered to the public.” 15 U.S.C. § 77m. 1. The Parties’ Arguments Defendants contend that the phrase, “bona fide offered to the public,” refers to the date that the securities in question were first or initially offered for sale to the public. (Defs.’ Mem.Supp.Summ.J. at 62-65; Defs.’ Reply Mem. at 44-55.) According to defendants, the thrift certificates and savings accounts at issue in this case were first offered to the public on August 2, 1977 when CST & L received authority from the State Commissioner of Financial Institutions to issue them. Under defendants’ theory, the three-year limitation period began to run at that time. Defendants argue that since the complaint was not filed until January 30, 1987, plaintiffs’ claims are barred by the three-year limitations period. Plaintiffs contend that the phrase “bona fide offered to the public” should be construed to mean the last date on which the securities at issue were offered for sale. (Pis.’ Mem.Supp.Part.Summ.J. at 83-91.) According to plaintiffs, the last date that CST & L securities were offered to the public was July 31, 1986, the date that CST & L closed it doors. If the statute began to run on that date, the complaint was filed within the three-year time period. Plaintiffs point out that under defendants’ construction of the statute, the time limitation would expire before any of the plaintiffs had purchased the securities at issue and before any of their section 12(1) claims had accrued. Defendants respond that plaintiffs’ interpretation of the statute would render the three-year provision meaningless because it would always be preempted by the one-year provision. According to defendants, if a potential plaintiff bought an unregistered security on the last date it was offered to the public, the sale would constitute a violation of section 12(1), thus triggering the one-year period. Consequently, the three-year period would never come into play. Defendants also contend that their view can be justified on policy grounds. In support of this contention, defendants state that because section 12(1) imposes almost strict liability, there is a strong policy interest in limiting the time beyond which such liability may be imposed. Concerning plaintiffs’ contention that defendants’ interpretation of the statute would cut off claims before they accrue, defendants point out that some products liability statutes of repose provide that no claims may be brought after a certain length of time has elapsed following the manufacture or sale of a product. These statutes may also cut off a potential plaintiff’s claim before he is injured. Plaintiffs respond that their interpretation would not render the three-year period meaningless. They point out that securities are often sold privately long after they are no longer offered to the public. Consequently, an investor might buy an unregistered security more than three years after it was last offered to the public. In that situation, the buyer’s claim would be barred by the three-year period, even though he filed suit within one year of the violation. (Pis.’ Reply Mem. at 16-17.) In regard to defendants’ analogy to products liability statutes, plaintiffs point out that courts have found several of these statutes of repose to be unconstitutional. See, e.g., Berry by & Through Berry v. Beech Aircraft, 717 P.2d 670 (Utah 1985) (collecting cases). In addition, plaintiffs argue that defendants’ interpretation of the statute of limitations is at odds with any policy to cut off claims that are remote in time from the alleged wrongdoing. Plaintiffs state that applying defendants’ interpretation to a products liability case, and assuming a five-year statute of repose, the manufacturer would be immune from suit for injuries caused by any product that was first manufactured in 1970 after 1975. As a result, the claim of an individual who was injured by a product manufactured and sold in 1992 would be time-barred, even though the product was still being manufactured and sold. (Pis.’ Reply Mem. at 13-16, file entry no. 222.) 2. Unregistered Securities Are Not “Bona fide Offered” The meaning of the phrase “bona fide offered to the public” is unclear. The magistrate judge believes that there is no “bona fide” offering where defendants have failed to comply with the registration requirements. However, at least two courts appear to have considered this possibility and concluded that the “bona fide offered” terminology applies to both registered and unregistered securities. See Slagell v. Bontrager, 616 F.Supp. 634, 636-37 (W.D.Pa.1985), aff'd, 791 F.2d 921 (3d Cir.1986); Morse v. Peat, Marwick, Mitchell & Co., 445 F.Supp. 619, 621-22 (S.D.N.Y.1977). The specific issue before the Morse court was whether the plaintiffs’ section 11 claims were barred by the three-year limitations period. Section 11 imposes liability for filing a false registration statement. The court held that in the case of a false statement, the securities are “bona fide offered to the public” when the registration statement becomes effective. Even though the court was not faced with the question of whether unregistered securities can be “bona fide offered,” the court nevertheless concluded that the “bona fide offered” language also applies to unregistered securities. In reaching that conclusion, the court stated that according to Professor Loss, “the phrase is specifically meant to describe a genuine rather than simulated offering of securities to the public.” Id., citing 4 Louis Loss, Securities Regulation 2331 (Supp.1969) [hereinafter 4 Loss]. It should be noted that in the statement quoted by the Morse court, Professor Loss is referring to the “bona fide offered to the public” language in the dealer's exemption provision, 15 U.S.C. § 77d(3)(A), rather than the provision at issue in this case. Furthermore, immediately following the quoted statement, Professor Loss states that the emphasis was on “public” and not “first.” 4 Loss, supra, at 2331. In Slagell, the plaintiff's complaint was barred by the one-year limitation period. Nevertheless, the court addressed the question of whether the complaint was timely under the three-year limitation period. The plaintiff argued that the period starts to run when the security is first legally available to the public. The court disagreed, stating that the period begins to run when the security is first offered to the investor. Slagell, 616 F.Supp. at 636-37. In every case involving the construction of a statute, the starting point is the language of the statute itself. Landreth, 471 U.S. at 685, 105 S.Ct. at 2301; Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 756, 95 S.Ct. 1917, 1935, 44 L.Ed.2d 539 (1975). The words in a statute should be given their “ordinary, plain meaning, unless there is a clear congressional intent to the contrary.” See Paluso v. Mathews, 573 F.2d 4, 9 (10th Cir.1978). With all due respect to Professor Loss, this court should give the term “bona fide” its common, ordinary meaning of “in good faith,” without fraud or deception. See Ware v. Hylton, 3 U.S. (3 Dall.) 199, 241, 1 L.Ed. 568 (1796); M. Lowenstein & Sons, Inc. v. British-American Mfg. Co., 7 F.2d 51, 53 (2d Cir.1925); Weber Showcase & Fixture Co. v. Waugh, 42 F.2d 515, 521 (W.D.Wash.1930). The phrase “bona fide offered” implies that the offeror has complied in good faith with the requirements of the law. See Hosmer v. Wallace, 97 U.S. 575, 581, 24 L.Ed. 1130 (1878) (holding that a bona fide pre-emption claimant was one who “had complied, or was proceeding to comply, in good faith, with the requirements of the law.”). Since the offer of unregistered securities is unlawful, it follows that they are not offered in good faith and thus, the “bona fide offered to the public” provision does not apply. Furthermore, as plaintiffs point out, the words “bona fide offered to the public” are not qualified with any word such as “first” or “initially” and such an interpretation is not within the ordinary meaning of the phrase. As recognized by the court in In re Bestline Prods. Sec. & Antitrust Litig., [1974-75 Transfer Binder] Fed.Sec.L.Rep. (CCH), ¶ 95,070, 1975 WL 386 (S.D.Fla. March 21, 1975), a “first offered” interpretation of “bona fide offered to the public” would encourage nonregistration. Such a policy is contrary to Congress’s purpose in enacting the securities laws which was to protect unsophisticated investors from securities fraud. See Brown v. Producers Livestock Loan Co., 469 F.Supp. 27, 32 (D.Utah 1978) (stating that securities laws should be liberally construed to protect innocent investors). Accordingly, this court should hold that since the securities at issue were unregistered, the three-year limitation does not apply. 2. First-offered Approach In the event that the court concludes that the phrase “bona fide offered to the public” applies to unregistered securities, the court must determine when the three-year provision begins to run. In his treatise, Professor Loss states, without discussion, that the phrase “bona fide offered to the public,” presumably means first offered. Louis Loss, Fundamentals of Securities Regulation, 989 (1988) [hereinafter Loss, Fundamentals of Securities Regulation ]. The majority of courts that have considered the issue have concluded that the phrase refers to the first offering of the security. See, e.g., In re National Mtg. Equity Corp. Mtg. Pool Certificates Sec. Litig., 636 F.Supp. 1138, 1167-68 (C.D.Cal.1986); Waterman v. Alta Verde Indus., Inc., 643 F.Supp. 797, 807-08 (E.D.N.C.1986), aff'd, 833 F.2d 1006 (4th Cir.1987); Morley v. Cohen, 610 F.Supp. 798, 815-16 (D.Md.1985); LeCroy v. Dean Witter Reynolds, Inc., 585 F.Supp. 753, 760-61 (E.D.Ark.1984); Morse v. Peat, Marwick, Mitchell & Co., 445 F.Supp. 619, 621-24 (S.D.N.Y.1977). However, Waterman is the only case cited above in which the plaintiff’s claims were timely under the one-year provision, but barred by the three-year provision. In the Morse case, which dealt with a section 11 claim, the court found that the plaintiffs’ claims were timely under the three-year provision. In most of the other cases, the plaintiffs’ claims were asserted more than one year after the violation and thus, were barred by the one-year limitation period. Consequently, even though the courts considered the three-year limitation period, the timeliness of the plaintiffs’ claims under that provision was not dispositive. Further, the courts adopting the first-offered approach appear to have started the running of the three-year limitation period at different times. See In re National Mtg., 636 F.Supp. at 1167-68 (apparently starting the period at time of plaintiffs purchase); Morley, 610 F.Supp. at 816 (assuming, for purposes of motion to dismiss, that the statute began to run on the date of purchase where neither party supplied the date that the securities were first offered to the public); Morse, 445 F.Supp. at 621-22, 623 (stating that an unregistered security is bona fide offered to the public on the date that trading commenced). Some of the courts following the first-offered approach did so with misgivings. For example, the court in LeCroy observed that under that approach, the claims of any person who purchases a security more than three years after it is first offered to the public are automatically time-barred, no matter how quickly after the sale he files suit. The court noted that this result obviously defeats the purpose of the registration requirements by completely insulating a seller from liability three years after the initial offering. To the extent that this interpretation “permits unscrupulous brokers to act with impunity after the third year following the initial public offering, it undermines the Act’s fundamental policy of ensuring that investors possess (or have the opportunity to possess) a modicum of information about the securities they ultimately purchase.” LeCroy v. Dean Witter Reynolds, Inc., 585 F.Supp. at 760. In Morse, the court observed that there is an “unquestionable preference, both legislative and judicial, for commencing a limitations period no earlier than the accrual of the cause of action.....” Morse, 445 F.Supp. at 624. In holding that the plaintiff’s section 11 claim was not barred by the three-year provision, the court was “convinced that it could not have been within the legislative intention to have the limitations period commence prior to the accrual of the statutory cause of action.” Morse, 445 F.Supp. at 623. 3. Prior Treatment by This Court This court has addressed the issue of when the three-year provision begins to run on two occasions. See Brown v. Producers Livestock Loan Co., 469 F.Supp. 27 (D.Utah 1978); Boone v. GLS Livestock Management, Inc., [1979-80 Transfer Binder] Fed.Sec.L.Rep. (CCH), 1197, 174, 1976 WL 904 (D.Utah April 9, 1976). The Boone court believed that in the case of an unregistered security, the relevant offering is made when the security is first offered to the plaintiff. Boone, [1979-80 Transfer Binder] Fed.Sec.L.Rep. (CCH) ¶ 97,174, at 96,486. However, the court found that the plaintiff’s section 12(1) claim was barred because it was filed more than one year after the sale of the unregistered security. Accordingly, the court’s decision did not turn on the three-year provision. In Brown, the court stated that section 12(1) claims must be brought within one year of the violation and in no event more than three years after the security is issued. Brown, 469 F.Supp. at 32. The court noted that there is often a problem pinpointing the date that the violation occurred for statute of limitations purposes. Relying on Boone, the court determined that the statute began to run at the time of sale. Because that occurred approximately five years prior to the filing of the complaint, the section 12(1) claim was barred. Id. Since the court referred to the time of the “violation,” its decision was apparently based on the one-year limitation period rather than the three-year provision. In addition to Boone, at least one other court has taken the position that the three-year limitation period should commence when the security is first offered to the plaintiff. Slagell v. Bontrager, 616 F.Supp. 634, 636-37 (W.D.Pa.1985). However, as plaintiffs observe, that interpretation appears to be inconsistent with the express language of the limitations provision. 4. Recent Tenth Circuit Treatment In a recent case, the Tenth Circuit considered whether claims under sections 11 and 12(2) of the 1933 Act were barred by the statute of limitations. Anixter v. Home-Stake Prod. Co., 939 F.2d 1420 (10th Cir.1991), amended on reh’g, 947 F.2d 897 (10th Cir.1991). Section 13 contains two slightly different three-year provisions; one applies to section 11 and section 12(1) claims, the other to section 12(2) claims. The pertinent portion of section 13 provides as follows: In no event shall any such action be brought to enforce a liability created under section 77k [section 11] or section 77/(1) [section 12(1)] of this title more than three years after the security was bona fide offered to the public, or under section 77/(2) [section 12(2)] of this title more than three years after the sale. 15 U.S.C. § 77m. In Anixter, defendant Home-Stake Production Company, an Oklahoma corporation, had been in the business of developing oil and gas properties and had sold working interests in various program leaseholds. Each year from 1964 through 1972, Home-Stake established subsidiary corporations known as Program Operating Corporations (POCs), representing separate production programs registered with the SEC which were then sold to the public. Contrary to Home-Stake’s representations, the money raised from the sale of the POCs was not used to develop particular oil properties, but was distributed to subsequent POC purchasers as purported income from oil production. In March 1973, plaintiffs filed suit. The court held that the three-year limitation in section 13 barred the claims of plaintiffs who bought the 1964, 1965, 1966, 1967, 1968, and 1969 POCs. The claims of purchasers who bought later POCs were barred by the one-year provision. The precise question before the court with regard to the claims of the 1964-69 POC purchasers was whether the three-year limitation acts as an absolute bar to suit or whether it is subject to the doctrines of equitable tolling or equitable estoppel. The court held that the three-year provision acts as an absolute bar. Anixter, 939 F.2d at 1435-37. In reaching this conclusion, the court did not discuss the difference between the limitation provision applicable to section 11 claims, which runs from the time the security was bona fide offered to the public, and the provision applicable to section 12(2) claims, which runs from the date of sale. Consequently, the court did not specifically address the meaning of the phrase “bona fide offered to the public.” Instead, the court held that the plaintiffs’ claims were cut off three years after the date of purchase. Id. at 1436. The court may have found it unnecessary to consider the distinction between the two provisions because each year’s POCs apparently were offered to the public and sold in the same year. As a result, the date the securities were first offered, the date they were last offered, and the date of sale were apparently less than a year apart. Because the complaint was filed in 1973, claims based on POCs for the years 1964, 1965, 1966, 1967, 1968, and 1969 would have been barred by the three-year limitation period whether it began to run on the date the securities were first offered, the date they were last offered, or the date of purchase. Although Anixter could be interpreted as suggesting that the time a security is bona fide offered to the public is equivalent to the date of sale, it is more likely that the court simply found it unnecessary to address the issue. In any event, Anixter is not controlling in the instant case because the Tenth Circuit did not address the meaning of “bona fide offered to the public.” 5. Last-offered Approach The better approach, taken by at least two courts, is that the phrase “bona fide offered to the public” means last offered to the public. In re Bestline Prods. Sec. & Antitrust Litig., [1974-75 Transfer Binder] Fed.Sec.L.Rep. (CCH), 1195,070, 1975 WL 386 (S.D.Fla. March 21, 1975); Hudson v. Capital Management Int’l, Inc., [1982-83 Transfer Binder] Fed.Sec. L.Rep. (CCH), ¶ 99,221, at 95,896 n. 3, 1982 WL 1384 (N.D.Cal. Jan. 6, 1982). See also Diskin v. Lomasney & Co., 452 F.2d 871, 875-76 (2d Cir.1971) (rejecting a limitations defense under the one-year provision on the ground that it would be unreasonable to start the limitations period “at a date before the action could have been brought — a construction which might lead in some extreme cases to a running of the statute of limitations before the claim had even arisen.”). The Bestline court considered the first-offered interpretation to be at odds with the remedial purpose of the 1933 Act. Bestline, [1974-75 Transfer Binder] Fed. Sec.L.Rep. (CCH), 11 95,070, at 97,751. In holding that the three-year limitation period began to run on the date the securities were last offered to the public, the court stated as follows: To hold as the defendants suggest would be to give individuals a license to sell unregistered securities to whomsoever they wished if they first offered the security to a group of people and, so to speak, "ran the gauntlet” for three years. It is doubtful that Congress intended the 1933 Act’s goals of registration, disclosure, and private enforcement to be so easily frustrated. Id. The reasoning of the Bestline court is persuasive, especially in a case such as this one where the issuer contemplated offering the unregistered securities indefinitely. Under the first-offered approach, the issuer would be totally immune from suit after three years, even though it continued to offer the securities for many years into future. 6. Conclusion The federal securities laws should be interpreted in a broad and flexible manner in order to effectuate their remedial purpose. Tcherepnin, 389 U.S. at 336, 88 S.Ct. at 553; Crowley v. Montgomery Ward & Co., 570 F.2d 875, 876 (10th Cir.1975). Accordingly, this court should hold that the three-year provision does not apply to unregistered securities because they are not “bona fide offered to the public.” Alternatively, the court should hold either that the relevant offering occurs when the security is last offered to the public or when the security was first offered to the plaintiff as stated by this court’s earlier decision in Boone. Accordingly, defendants’ motion for summary judgment should be denied on this issue. 7. Change in Nature of Investment as Offer of New Security Plaintiffs contend that even if the court holds that the relevant offering is the first offering, their claims were filed within the three-year time limitation. (Pis.’ Mem. Supp.Part.Summ.J. at 91-94; Pis.’ Reply Mem. at 17-19.) In support of this contention, plaintiffs state that the risk associated with investment in CST & L securities increased so significantly during the three years prior to the filing of the complaint that the accounts and securities offered to the public were fundamentally different investments than those offered prior to that time. As a result, the offering of securities during the three-year period prior to suit constituted the offering of new securities. Since each plaintiff purchased new certificates, invested the proceeds of matured certificates in new certificates, or invested additional amounts in existing accounts during the three-year period, plaintiffs contend that their claims were asserted within three years of the time that the new securities were first offered to the public. In support of this argument, plaintiffs cite cases stating that significant changes in the rights of a security holder can result in the purchase or sale of a new security. The Second Circuit has stated that in order for changes in the rights of a security holder to qualify as the purchase of a new security, “there must be such significant change in the nature of the investment or in the investment risks as to amount to a new investment.” Abrahamson v. Fleschner, 568 F.2d 862, 868 (2d Cir.1977), cert. denied, 436 U.S. 913, 98 S.Ct. 2253, 56 L.Ed.2d 414 (1978). Other courts have concluded that significant changes associated with a security can constitute the purchase or sale of a new security. See Smith v. Cooper/T. Smith Corp., 846 F.2d 325, 327 (5th Cir.1988) (modification of stock purchase agreement was purchase or sale within the meaning of section 10(b)); Keys v. Wolfe, 709 F.2d 413, 416-17 (5th Cir.1983) (allegation that modification of tree growing and orchard management contracts owned by investors in pecan plantation constituted such a change in investment as to amount to purchase of new security was sufficient to state a claim under section 10(b)); Diaz Vicente v. Obenauer, 736 F.Supp. 679, 692-94 (E.D.Va.1990) (holding letter which