## Facts

- Sam and Alice Weaver bought a $50,000, six-year certificate of deposit (CD) from Marine Bank, a federally regulated, FDIC-insured bank.
- The Weavers pledged the CD to Marine Bank as collateral to guarantee a $65,000 loan to Columbus Packing Co., which already owed the bank money and was overdrawn.
- In exchange for the guarantee, Columbus Packing’s owners (the Piccirillos) entered a separate agreement with the Weavers providing a share of company profits and other compensation.
- The Weavers alleged bank officers represented that the $65,000 loan would provide working capital, but the proceeds were instead used to satisfy Columbus Packing’s overdue obligations to the bank.
- Columbus Packing went bankrupt about four months later, and Marine Bank sought to claim the pledged CD.
- The Weavers sued the bank alleging, among other claims, securities fraud under Exchange Act § 10(b) and SEC Rule 10b-5, asserting they were fraudulently induced to guarantee the loan.

## Issues

1. Whether an FDIC-insured certificate of deposit issued by a federally regulated bank is a “security” under the Securities Exchange Act, permitting a § 10(b) claim.
2. Whether the privately negotiated profit-sharing and compensation agreement between the Weavers and the Piccirillos, tied to the Weavers’ loan guarantee, is a “security” under the Act.

## Decision

- The Supreme Court reversed the Third Circuit and reinstated summary judgment for Marine Bank.
- The Court held that neither the CD nor the Weavers–Piccirillo agreement was a “security” for purposes of Exchange Act § 10(b).
- Because no “security” was involved, the alleged fraud was not actionable under § 10(b) and Rule 10b-5 on these facts.

## Legal Principles

- The Exchange Act’s definition of “security,” though broad, does not create a general federal remedy for all fraud; the instrument must fall within the ordinary concept of a security as informed by the securities laws’ purposes.
- A standard time CD issued by a federally regulated, FDIC-insured bank is not a “security” where payment is effectively guaranteed and the instrument is protected by a separate regulatory and insurance scheme rather than market-based investment risk.
- A profit-sharing feature does not, by itself, convert a private arrangement into a “security”; a unique, one-on-one, non-marketable agreement not offered to the public and not resembling common trading instruments generally falls outside federal securities regulation.
- When a transaction does not involve a “security,” alleged misconduct may remain subject to state-law or regulatory remedies, but not Exchange Act § 10(b).

## Conclusion

The Court held that § 10(b) and Rule 10b-5 did not apply because the FDIC-insured bank CD and the individualized profit-sharing guarantee arrangement were not “securities,” limiting federal securities-fraud coverage to instruments and transactions that fit within the securities laws’ intended scope.


Marine Bank v. Weaver, 455 U.S. 551 (1982)