Label and Significant Characteristics Test Law and Legal Definition

Label and significant characteristics test refers to a legal rule governing an instrument under securities laws. An instrument is governed by the securities laws upon the following conditions:

1.If an instrument is labeled as stock;

2.If an instrument has the significant characteristics typically associated with shares of stock.

In Fore Way Express v. Bast, 178 Wis. 2d 693 (Wis. Ct. App. 1993), it was held that instruments purported to be stocks should be examined under a label and significant characteristics test.