Texas Business Court Clarifies When A Promissory Note Is Not A ‘Security’

In a July 3, 2026, opinion in Jean Christine Thompson and Thompson Petroleum Corporation v. Anchor Capital GP LLC and Michael Mann, Judge Bill Whitehill (Texas Business Court, First Division) granted partial summary judgment in favor of the defendants, holding that the promissory note underlying the parties’ disputes was not a “security” subject to the Texas Securities Act (TSA). The court’s analysis may offer valuable insights for business owners and lenders navigating the intersection of commercial lending and securities law.

Background

The parties’ dispute arose from several years of financial dealings between Jean Thompson, an owner and president of Thompson Petroleum Corporation, a family business managing the Thompson family’s assets (Thompson), and Michael Mann, founder and CEO of Anchor Capital GP LLC, a private equity investment brokerage (Anchor). Thompson had, allegedly, previously invested millions into funds managed by Anchor. In September 2024, Thompson allegedly agreed to loan Anchor funds to buy out of one Anchor’s partners. Thompson’s alleged agreement to loan funds was conditioned on Mann providing a personal financial statement and a loan guarantee. The subsequent promissory note was secured with collateral and personally guaranteed by Mann.

In May 2025, Thompson allegedly began seeking access to Anchor’s books and records to inspect the collateral securing the promissory note. After Thompson determined that Anchor’s alleged failure to provide the requested records was an event of default under the promissory note, Thompson accelerated the note and filed suit, including in her claims a claim under the TSA based on alleged material misstatements in connection with the sale of a “security.”

The Court’s Analysis

Anchor moved for partial summary judgment, arguing that the promissory note was not a “security” under the TSA. Following Texas and federal precedent, the court applied the “family resemblance” test established by the U.S. Supreme Court in Reves v. Ernst & Young, 494 U.S. 56 (1990). The “family resemblance” test creates a presumption that any note with a term of more than nine months is a security, but that presumption can be rebutted if the note “bears a strong family resemblance” to categories of instruments traditionally excluded from securities regulation — such as notes for consumer financing, notes secured by a home mortgage, or short-term business loans secured by business assets.

The court analyzed four factors to determine whether the promissory note at issue bore a “family resemblance” to one of the enumerated exceptions:

1. Party Motivations. First, the court found that the parties had mixed motives for entering into the promissory note. While Thompson received interest (which qualifies as “profit”), she agreed to below-market rates and borrower-friendly terms, suggesting profit was not her primary motivation. However, the court noted that Mann clearly used the funds for investment purposes — to grow the business and avoid diluting equity. This factor slightly favored treating the promissory note as a security in the court’s view.
2. Plan of Distribution. Thompson acknowledged that the promissory note was not commonly traded for speculation or investment, conceding the second factor in Anchor’s favor.
3. Reasonable Expectations of the Investing Public. The court determined that the investing public would not reasonably view the promissory note as a security because (a) it was titled “Secured Promissory Note,” consistently referred to itself as a “loan” instead of an “investment,” and was never advertised as an investment; and (b) the parties were sophisticated businesspersons represented by experienced counsel.
4. Risk-Reducing Measures. Finally, the court held that evidence of risk-reducing measures weighed against the promissory note being a security, observing that it was (a) collateralized; (b) personally guaranteed by Mann; (c) contained extensive representations, warranties, and covenants; and (d) gave Thompson rights to inspect collateral and receive financial information upon request.

Weighing these factors, the court concluded as a matter of law that the promissory note was not a “security” subject to the provisions of the TSA.

Practical Takeaways for Texas Businesses

For businesses engaged in lending or borrowing, the Texas Business Court’s decision in Thompson v. Anchor Capital may provide clarity on distinguishing commercial loans from securities:

• Sophisticated Parties May Face Different Standards: Courts may consider the sophistication of the parties. Experienced businesspersons and persons with capable legal counsel may be less likely to be seen as needing securities law protections.
• Structure Matters: A promissory note’s title, terminology, and protective covenants may influence whether it is treated as a security. Using clear “loan” language and avoiding investment-related terminology may help avoid an unintended securities classification.
• Risk Mitigation Weighs Heavily: Collateralization, personal guarantees, and robust contractual protections may demonstrate that parties do not need the typical investor protections provided by securities laws.