Opinion
principal question presented by this appeal is whether the trial court, in a prosecution for the sale of unqualified securities, erred *718in instructing the jury that certain “Corporation Promissory Notes” were “securities” within the meaning of the Corporate Securities Law. (Corp. Code, § 25000 et seq.1)
I.
Joseph and Dennis Figueroa appeal from a judgment of conviction for one count of selling unqualified securities. (§§ 25110, 25540.) The jury dead: locked on thirteen additional counts, eight alleged against Joseph and five against Dennis. Thereafter, a mistrial was declared on those counts, and they were dismissed with the understanding that they could be considered by the court for restitution purposes. Both appellants were given terms of probation with conditions including restitution, a suspended county jail term, and community service.
Only the facts relating to the count on which appellants were convicted are relevant to this appeal.
In mid-March of 1979, Arlo Kurrle responded to an advertisement which ' had appeared in the San Jose Mercury News. The ad stated “Solar & Energy Business. Partner wanted with $7,000 or more. Active or nonactive.” Kurrle called one of the two phone numbers listed in the ad and spoke to Joseph Figueroa, who described an existing insulation business and his desire to expand into solar energy.
Kurrle met Joseph and his son, Dennis, the following day. The Figueroas told Kurrle about Figueroa Insulation & Energy Co., Inc. (Insulation) of which Dennis was president. The new solar energy business would also be a corporation." Kurrle learned about two other businesses, Figueroa Financial Insurance Services, Inc. (Insurance) and Figueroa Business & Financial Consultants (Financial).
Joseph and Dennis proposed that Kurrle invest $10,000 in their business. The money was to be used for the purchase of insulation equipment and the installation of telephones used to solicit loan customers.
At the first meeting, Kurrle and Joseph discussed whether Kurrle was to be active in the business. Kurrle expressed interest in having a direct role, possibly in the sales or management areas.
A few days later, Kurrle called Joseph and agreed to lend the company $10,000. There was no discussion about what form Kurrle’s investment *719would take, but Kurrle “was thinking in terms of a loan . . . that would be documented. ” During the conversation, Joseph told Kurrle that he would be an officer in one of the Figueroa corporations.
Over the next four weeks, Kurrle paid the money to the Figueroas in five separate installments evidenced by five 2-year notes.2 The notes were to earn 10 percent interest annually. Kurrle had the option to take payment in cash or shares of the company. The fourth loan installment, for $2,500, constituted the basis for the charge on which the Figueroas were eventually convicted.3 Kurrle made that loan by giving the Figueroas a check payable to Dennis. The loan was witnessed by a “Corporation Promissory Note” from Insulation which was signed by Dennis. In relevant part it stated:
“April 27th, 1979
Corporation Promissaroy [s/cl Note $2,500.00
For the Value Received, on or Before 24 months after date, without grace The Figueroa Insulation & Energy Company, Inc., promises to pay to the order of Mr. Arlo Kurrle, of San Jose, California or at his home or office, [t] The sum of $2,500 two thousand dollars & Five Hundred at the rate of 10% per Cent annum until paid. ... [f] ... Its [szc] agreed and understood, that this corporation note is all due an [sz'c] payable in 24 months from date of this note and its |>zc] further agreed and understood, that interest is to be paid annual [szcl each year, but all due and payable April 27th, 1981.
Kurrle began working in the Figueroa office sometime in early April, shortly after making the first loan installment. He was made secretary/treasurer of Financial and Insulation and worked primarily for Joseph and Financial, updating loan source lists and contacting potential lenders. He also accompanied Dennis on sales calls for Insulation and developed a demonstration kit used by Dennis in his presentations. Kurrle stayed with the business for about four months. Although the trial testimony does not indicate whether he was ever repaid, the probation report and restitution order strongly suggest that he was not.
II.
The first claim raised by appellants is that the trial court committed reversible error by failing to specify in its instructions what burden of proof *720must be met to establish that the sale was exempted from qualification. Since Justice King’s opinion in the Court of Appeal correctly analyzes and resolves this issue, this court adopts that part of his opinion as its own.
It is noteworthy that the Attorney General concedes that the Court of Appeal’s resolution of this issue is correct and that the judgment of conviction must be reversed on this basis. With appropriate deletions and additions,* that analysis follows:
[Section 25110 makes it unlawful “for any person to offer or sell in this state any security in an issuer transaction . . . unless such sale has been qualified under section 25111, 25112 or 25113 . . . or unless such security or transaction is exempted under Chapter 1 (commencing with Section 25100) of this part.’’'’ (Italics added.) Sections 25100 through 25105 specify securities and transactions which are exempted from qualification under the Corporate Securities Law. The statute upon which appellants relied was section 25102, subdivision (e), which exempts from the provisions of section 25110 “[a]ny offer or sale of any evidence of indebtedness, whether secured or unsecured, and any guarantee thereof, in a transaction not involving any public offering. ” (Italics added.)]
[f] Section 25163 provides “[i]n any proceeding under [the Corporate Securities Law], the burden of proving an exemption or an exception from a definition is upon the person claiming it.” Since appellants claimed they came within a private offering exemption to section 25110, they bore the burden of proving [that fact]. (See People v. Park (1978) 87 Cal.App.3d 550, 566-567 [151 Cal.Rptr. 146] [state did not bear burden of proving lack of private offering exemption in prosecution under section 25110]; People v. Murphy (1936) 17 Cal.App.2d 575, 585-586 [62 P.2d 592].) Joseph’s proposed instruction therefore was partially erroneous, as it placed the burden on the state to disprove any exemptions.[4] [The trial court properly placed] this burden of proof on the Figueroas, but [did] not define the quantum or degree of that burden.
*721The court is required to instruct the jury on both the assignment and the magnitude of burdens of proof. (Evid. Code, § 502.) Section 502 presents four degrees of burdens of proof: “that a party raise a reasonable doubt concerning the existence or nonexistence of a fact or that he establish the existence or nonexistence of a fact by a preponderance of the evidence, by clear and convincing proof[,] or by proof beyond a reasonable doubt.” Evidence Code section 501 provides “[ijnsofar as any statute, except section 522, assigns the burden of proof in a criminal action, such statute is subject to Penal Code section 1096. ”[5] The Law Revision Commission comment on Evidence Code section 501 notes that “where a statute allocates the burden of proof to the defendant on any [issue other than insanity] relating to the defendant’s guilt, the defendant’s burden ... is merely to raise a reasonable doubt as to his guilt.”
The issue of the defendant’s precise burden of proving he or she comes within an exemption to the securities registration law is one of first impression in California.[6] In People v. Tewksbury (1976) 15 Cal.3d 953 [127 Cal.Rptr. 135, 544 P.2d 1335], [this] court discussed the degrees of burdens of proof which may be placed on a defendant in a criminal case. (3) “[W]hen there is placed upon an accused the burden of interjecting a factual contention which, if established would tend to overcome or negate proof of any element of the crime charged as otherwise established by the People, the accused need only raise a reasonable doubt as to the existence or nonexistence of the fact in issue.” (Id., at p. 963.) Examples of such instances include unconsciousness and alibi defenses. ([Ibid.]) On the other hand, defendants may be required to prove by a preponderance of the evidence defenses “which raise factual issues collateral to the question of the accused’s guilt or innocence and do not bear directly on any link in the chain of proof of any element of the crime.” (Id., at p. 964.) Among such instances are entrapment defenses and challenges to testimony as being hearsay or that of an accomplice. (Id., at pp. 964-968.)
*722Jefferson’s Evidence Benchbook makes a similar distinction on the defendant’s burden of proof. “On any issue of defendant’s guilt that is in the nature of an affirmative defense, the burden of proof assigned to defendant shall be merely to raise a reasonable doubt as to his guilt; . . . [o]n a guilt issue other than whether defendant committed the criminal acts charged, the burden of proof assigned to defendant may be fixed at proof by a preponderance of the evidence.” (2 Jefferson, Cal. Evidence Bench-book (2d ed. 1982) § 45.1, p. 1640.)
An exemption defense to a prosecution under the state securities law is an affirmative defense which is not “collateral” to the defendant’s guilt. Unless the Legislature provides otherwise, the defendant’s burden of proof is merely to raise a reasonable doubt that the offering did not require registration. Here the trial court erred by refusing to instruct on this degree of the defendants’ burden of proof.[7]
The court’s error was compounded by its instruction which said “[i]t is unlawful for any person to offer or sell in this state any security unless such sale has been qualified or unless such security has been exempted with the California Corporations Commissioner. ” (Italics added.) This instruction [gave] the erroneous impression that the Figueroas had to apply for and receive a formal exemption from the Corporations Commissioner.
The jury deliberated two days and deadlocked on three related charges [involving Kurrle] where the only defense [permitted to go to the jury] was a private offering exemption.[8] During deliberations, the jury requested copies of the instructions on exemptions. This was a close case and it is reasonably probable that a result more favorable to the defendants would have occurred had appropriate instructions been given. (See People v. Watson (1956) 46 Cal.2d 818, 836 [299 P.2d 243].) [End of excerpt from Court of Appeal opinion.] As the Attorney General concedes, reversal of the conviction is required on this basis.
*723III.
The principal question presented in this case is whether the trial court erred in instructing the jury that the promissory notes involved in the Kurrle transactions were “securities” under the Corporate Securities Law.9
At trial, the defense offered evidence, some of which was admitted and some of which was excluded, on the question of whether securities were involved in the Kurrle transactions. (See post, at p. 740.) The defense also proffered an instruction which purported to guide the jury in determining this question. That instruction was refused.
Over defense objection, the trial court charged the jury that “the promissory notes received by Arlo Kurrle are securities as defined in section 25019 of the Corporate Securities Act.” The trial court did not read the section 25019 definition to the jury, nor did it elucidate further on the meaning of the term. Ironically, this instruction followed one which told the jury that one of the elements the prosecution had to prove beyond a reasonable doubt was whether “a security in an issuer transaction” was involved in the section 25110 counts.10
The district attorney relied fully on the court’s charge. During the first of her two closing arguments, she stated: “With respect to the issue of securities. Again, that’s another issue that’s going to be taken out of your hands. You don’t have to make the determination about whether those limited partnerships involved in counts one, two and three in Figueroa Diversified Investments was a security or not. His honor is going to instruct you that as *724a matter of law those are securities, [if] His honor will also instruct you that the limited partnerships involved in counts four and five ... are securities. But that’s another matter that’s not within your purview, you don’t have to decide that, it’s been decided for you. [if] With respect to counts six, seven, eight and nine the promissory notes that were received by Mr. Kurrle, his honor will also instruct you that those are securities, as a matter of law. The law says and you have to accept it. ”
The precise issue raised by the trial court’s actions is whether the giving of the challenged instruction was tantamount to a directed verdict on the “security” element of the offense.
It has long been recognized that a trial judge “may not direct a verdict of guilty no matter how conclusive the evidence.” (Brotherhood of Carpenters v. United States (1947) 330 U.S. 395, 408 [91 L.Ed. 973, 985, 67 S.Ct. 775]; accord United States v. Martin Linen Supply Co. (1977) 430 U.S. 564, 572-573 [51 L.Ed.2d 642, 651-652, 97 S.Ct. 1349]; Sparf and Hansen v. United States (1895) 156 U.S. 51, 105 [39 L.Ed. 343, 362, 15 S.Ct. 273]; cf. Sandstrom v. Montana (1979) 442 U.S. 510, 524 [61 L.Ed.2d 39, 51, 99 S.Ct. 2450]; Bollenbach v. United States (1946) 326 U.S. 607, 615 [90 L.Ed. 350, 355-356, 66 S.Ct. 402].) Only recently, a plurality of the Supreme Court reaffirmed this principle, observing that “[t]he Court consistently has held that ‘a trial judge is prohibited from entering a judgment of conviction or directing the jury to come forward with such a verdict . . . regardless of how overwhelmingly the evidence may point in that direction.’” (Connecticut v. Johnson (1983) 460 U.S. 73, 84 [74 L.Ed.2d 823, 832, 103 S.Ct. 969], quoting Martin Linen Supply, supra, 430 U.S. at pp. 572-573 [51 L.Ed.2d at p. 652].)
The prohibition against directed verdicts “includes perforce situations in which the judge’s instructions fall short of directing a guilty verdict but which nevertheless have the effect of so doing by eliminating other relevant considerations if the jury finds one fact to be true.” (United States v. Hayward (D.C. Cir. 1969) 420 F.2d 142, 144.) As one panel of the Fifth Circuit has stated, “[N]o fact, not even an undisputed fact, may be determined by the judge.” (Roe v. United States (5th Cir. 1961) 287 F.2d 435, 440, cert, den. (1961) 368 U.S. 824 [7 L.Ed.2d 29, 82 S.Ct. 43]; accord United States v. Musgrave (5th Cir. 1971) 444 F.2d 755, 762.)
Johnson and Sandstrom illustrate these principles well. In Sandstrom the jury was instructed that “‘[t]he law presumes that a person intends the ordinary consequences of his voluntary acts.’” (442 U.S. at p. 517 [61 L.Ed.2d at p. 46].) The court held, by a seven-to-two vote, that the jurors “could reasonably have concluded that they were directed to find against *725defendant on the element of intent.” (442 U.S. at p. 523 [61 L.Ed.2d at p. 50].)
In Johnson the instruction was that “ ‘every person is conclusively presumed to intend the natural and necessary consequences of his act.’” (460 U.S. at p. 78 [74 L.Ed.2d at p. 829].) The high court unanimously condemned this instruction as error of constitutional magnitude. Four justices expressed the view that it was the “functional equivalent of a directed verdict” on the issue of intent (460 U.S. at p. 84 [74 L.Ed.2d at p. 832] (plur. opn.)), while four others believed that any instruction which “remove[d] an issue completely from the jury’s consideration” would require reversal (id., at p. 95 [74 L.Ed.2d at p. 839] (dis. opn.)).11 This court has read Johnson as standing for the proposition “that at least eight justices of the United States Supreme Court . . . agree that a jury instruction which . . . take[s] an issue completely from the jury” is reversible error. (People v. Garcia (1984) 36 Cal.3d 539, 554.)
The rule prohibiting verdicts directed against an accused emanates from the guarantee of due process and the right to a jury trial. Due process “protects the accused against conviction except upon proof beyond a reasonable doubt of every fact necessary to constitute the crime with which he is charged” (In re Winship (1970) 397 U.S. 358, 364 [25 L.Ed.2d 368, 375, 90 S.Ct. 1068]). It requires the state to prove “‘every ingredient of an offense beyond a reasonable doubt . . . .’” (Sandstrom v. Montana, supra, 442 U.S. at p. 524 [61 L.Ed.2d at p. 51], quoting Patterson v. New York (1977) 432 U.S. 197, 215 [53 L.Ed.2d 281, 295, 97 S.Ct. 2319].)
The right to a jury trial reflects the framers’ “fundamental decision about the exercise of official power—a reluctance to entrust plenary powers over the life and liberty of the citizen to one judge or to a group of judges.” (Duncan v. Louisiana (1968) 391 U.S. 145, 156 [20 L.Ed.2d 491, 500, 88 S.Ct. 1444].) As Chief Judge Aldrich of the First Circuit has observed, “the jury, as the conscience of the community, must be permitted to look at more than logic. . . . If it were otherwise there would be no more reason why a verdict should not be directed against a defendant in a criminal case than in a civil one. The constitutional guarantees of due process and trial by jury require that a criminal defendant be afforded the full protection of *726a jury unfettered, directly or indirectly. [Citation.]” (United States v. Spock (1st Cir. 1969) 416 F.2d 165, 182; see also Cabaña v. Bullock (1986) 474 U.S. -, - [88 L.Ed.2d 704, 715, 106 S.Ct. 689, 696]: “[A] jury’s verdict cannot stand if the instructions provided the jury do not require it to find each element of the crime under the proper standard of proof, [citation]. Findings made by a judge cannot cure deficiencies in the jury’s finding as to the guilt or innocence of a defendant resulting from the court’s failure to instruct it to find an element of the crime. [Citation.]”)12
The California cases are generally in accord with these explanations. For example, in People v. Shavers (1969) 269 Cal.App.2d 886 [75 Cal.Rptr. 334], the court found reversible error in an instruction which charged that if the jury found the accused guilty of robbery “it is robbery in the first degree.” (Id., at p. 888.) “Where a plea of not guilty has been entered, the trial judge may not direct a verdict of guilty even though the prosecution’s case is strong and the defense does not present a substantial evidentiary case. [Citation.] The judge may comment on the evidence [citation] but may not instruct the jury that as a matter of law some element of the crime charged has been adequately proved.” (Id., at pp. 888-889, italics in original.)13
This court, relying on the foregoing United States Supreme Court authority, has also condemned procedural devices which are analogous to a directed verdict. (See, e.g., People v. Garcia, supra, 36 Cal.3d at p. 551 [failure to instruct on element of intent]; cf. People v. Roder (1983) 33 Cal.3d 491, 496 [189 Cal.Rptr. 501, 658 P.2d 1302] [instruction on presumption of guilty knowledge in receiving stolen property prosecution].) As the Garcia court observed, “[t]he reasoning of the [high court] opinions . . . would invalidate any instruction . . . which would permit the state to circumvent the requirement that it prove every fact necessary for conviction *727beyond a reasonable doubt. [Citation].” (36 Cal.3d at p. 551; cf. People v. Miller (1962) 57 Cal.2d 821, 828 [22 Cal.Rptr. 465, 372 P.2d 297] [error to instruct that “evidence in this case” is such that defendant is either guilty of first degree murder or innocent altogether since such an instruction removes possibility of conviction on lesser included offenses].)
Cases from the federal circuits are more numerous on the subject. Two cases involving federal securities violations hold that it is error to charge the jury that a particular instrument is a “security” within the meaning of the federal securities laws.14 (United States v. Johnson (5th Cir. 1983 (en banc)) 718 F.2d 1317; Roe v. United States, supra, 287 F.2d at p. 440 [“[A]s a matter of law, the evidence of these transactions, if credited, would constitute the sale or delivery of an ‘investment contract,’ hence a ‘security’ .... But the if in ‘if credited’ is a big one. By its very nature, it is the peculiar facts of the setting which turns the offer from a mere sale of property into a sale of a security. That means that the trier of fact . . . must determine the issue. . . .”].)15
United States v. Johnson, supra, 718 F.2d 1317, is particularly instructive not only because it contains an extensive discussion of the issue, but because it is an en banc decision which was preceded by an opinion by a three-judge panel which had reached a contrary result. (700 F.2d 163, rehg. granted 700 F.2d at p. 181.) For these reasons, it is discussed in some detail.
*728Johnson was a trader in precious metals who was rehired by his former employer for the purpose of resuscitating a failing company. Johnson’s primary task was to demonstrate to company auditors that the company was solvent so that a public stock offering could be made. To this end, he travelled to Dallas and obtained a “Gold Certificate Contract” from a businessman contact. The certificate purported to assign Johnson and the company a substantial quantity of gold. Johnson returned to California with the certificate and presented it to company auditors. They were unable to verify the existence of the gold represented in the contract. Shortly thereafter, the company declared bankruptcy. Johnson was subsequently charged with, im ter alia, the interstate transportation of a falsely made security knowing it was not authentic. (18 U.S.C. § 2314.)
One of Johnson’s defenses was that the certificate was not a “security” within the meaning of the federal statute. The trial court nevertheless refused an instruction defining the term and instructed the jury that the gold contract was a “security.” The jury found Johnson guilty.
The court of appeals reversed. It held that the trial judge “was no more entitled to refuse to allow the jury to decide whether the Gold Certificate was a security than he would have been permitted to refuse to charge on whether the Certificate was falsely made or whether Johnson acted knowingly. Knowledge that the Gold Certificate was false or forged was, of course, also an essential element of the crime. But submission of this element to the jury does not excuse the failure to submit a different element: whether, regardless of Johnson’s subjective belief or knowledge, the Gold Certificate was a security.” (Johnson, supra, 718 F.2d at p. 1323.)
Although Johnson was a case in which the “security” element of the charge was hotly contested, the court frankly acknowledged the necessity of submitting that question to the jury even when it was not seriously open to dispute. “[Wjhether a tangible document or thing meets a statutory definition . . . depends upon the probative value of evidence even when the evidence seems so clear as to leave no room for fool’s questions.” (Id., at p. 1324, italics added.)16 *729Several other circuit court decisions hold that it is error to instruct the jury that an essential element of the offense has been established.17 On the other hand, as the Johnson majority frankly conceded (718 F.2d at p. 1323, fn. 17), there is also a substantial body of federal authority to the contrary.18
*730The latter cases appear to rely on one or both of the following two premises: (1) that the evidence at trial leaves little doubt as to whether a particular element of the offense has been established, and (2) that the challenged instruction is within the trial court’s province because the issue that it resolves is purely a question of law. The Attorney General maintains that either of these premises justifies an instruction like the one given here.
The first premise is clearly unsupportable. If a judge were permitted to instruct the jury on the basis of assertedly “undisputed” evidence that a particular element had been established as a matter of law, the right to a jury trial would become a hollow guarantee. As the court in Konda v. United States, supra, 166 Fed. at page 93 observed, “an accused person has the same right to have 12 laymen pronounce upon the truth or falsity of each material averment in the indictment, if the evidence against him is clear and uncontradicted, as he unquestionably would have if it were doubtful and conflicting. Inasmuch as jurors are rightly trusted, in close and difficult cases, to maintain the peace and dignity of organized society, surely they may be relied on in the plain and simple ones.”
As to the second premise, the distinction between questions of law and questions of fact, Judge Rubin’s comments in Johnson are fitting: “This distinction is at best elusive. There is no categorical distinction between ‘legal’ and ‘factual’ questions, for in every case application of a legal principle turns on the presence of particular facts. A contemporary author has aptly explained why the ‘law’ and ‘fact’ distinction misses the mark in criminal trials.
“ ‘There is considerable misunderstanding in the minds of the general public regarding provisions making a jury the judge of fact and not of law. This misunderstanding is attributable in large part to the inaccuracy of the general rule that juries decide only the facts. This is an inaccurate expression because it leaves the impression that juries are not judges of the law at any time or in any sense. Juries are always judges of the law in the sense that juries must pass on the manner and the extent in which the law expounded by the judge fits the facts brought out in the evidence. This process requires juries to perform the legal function of interpretation and application. In die absence of express authority, however, juries are not judges of the law in determining what principle of law is applicable to the evidence.’ *731[H] S. McCart, Trial by Jury 116-17 (1965) (emphasis in original). Hence, although attempting to separate ‘fact’ from ‘law’ may sometimes be useful, particularly when a statute or a federal rule turns on the differentiation, it is not the issue here. The issue is the role of the jury in the trial guaranteed to the accused.” (718 F.2d at p. 1321, second italics added, fns. omitted.)
The Attorney General, seizing on this “law/fact” distinction, points to a “lengthy and settled” body of case law which assertedly holds that the question of what constitutes a security is one of law reserved exclusively to the trial court. (See People v. Skelton (1980) 109 Cal.App.3d 691, 712-713 [167 Cal.Rptr. 636], cert. den. (1981) 450 U.S. 917 [67 L.Ed.2d 343, 101 S.Ct. 1361]; People v. Miller (1961) 192 Cal.App.2d 414, 418 [13 Cal.Rptr. 260]; People v. Rankin (1959) 169 Cal.App.2d 150, 160 [337 P.2d 182], cert. den. (1960) 362 U.S. 905 [4 L.Ed.2d 556, 80 S.Ct. 616]; People v. Marvin (1941) 48 Cal.App.2d 180, 193 [119 P.2d 413]; People v. Dutton (1940) 41 Cal.App.2d 866, 872-873 [107 P.2d 937]; People v. Rubens (1936) 11 Cal.App.2d 576, 587 [54 P.2d 98]; People v. McCalla (1923) 63 Cal.App. 783, 789 [220 P. 436], disapproved on other grounds in People v. Elliot (1960) 54 Cal.2d 498, 503 [6 Cal.Rptr. 753; 354 P.2d 225], but see People v. Pompa-Ortiz (1980) 27 Cal.3d 519 [165 Cal.Rptr. 851, 612 P.2d 941] [Elliot disapproved]; S.E.C. v. Howey Co. (1946) 328 U.S. 293, 299-300 [90 L.Ed. 1244, 1249-1250, 66 S.Ct. 1100, 163 A.L.R. 1043].) However, only four cases, McCalla, Dutton, Marvin and Skelton, squarely hold that the court may instruct the jury that a particular instrument is a security within the meaning of the state corporate securities laws.19 Moreover, as will become apparent, none of these holdings withstands scrutiny under more modern concepts of due process and the right to a jury trial.
The origins of the holding appear in McCalla. There, the appellant argued that the trial court erroneously prevented him from demonstrating that his counsel had advised him that an investment certificate issued to an investor *732was not a “security” within the meaning of the Corporate Securities Act. The appellate court rejected this argument, adhering to the rule that ignorance of the law is no excuse. (63 Cal.App. at pp. 793-796.) In so doing, the court approved the trial court’s instruction that the certificate was a “security” within the meaning of the state securities law. The court cited no authority for its conclusion and did not appear to recognize the constitutional implications of its holding.20
Dutton came 17 years after McCalla, but failed to fill the analytic void. There, the court recognized that the instruction withdrew “from the jury the question as to whether certain documents introduced into evidence were securities” (41 Cal.App.2d at p. 872), but found no error in view of the state constitutional provision permitting the court to “instruct the jury on the law applicable to the facts of the case.” (Former art. VI, § 19, repealed Nov. 8, 1966.) “In view of the definition of the term ‘security’ as set forth in section 2 of the Corporate Securities Act, there can be no doubt that as a matter of law the people’s exhibits in question constituted securities and the court was authorized to so advise the jury.” (41 Cal.App.2d at p. 873.)
One year later came Marvin. It followed closely in McCalla’s and Dutton’s wake, making no waves of its own. It also failed to analyze the question in any great detail. Noting only that there was no dispute that the documents involved came within the “security” definition, the Court of Appeal concluded that “[i]t was therefore within the province of the trial court to instruct the jury that the documents . . . constituted securities as a matter of law.” (48 Cal.App.2d at p. 193.)
Though it came nearly four decades after Marvin, Skelton merely repeated the “rules” which its predecessors had enunciated. Relying on Dutton and on the principle that whether a particular document is a security is to be determined on a case-by-case basis (People v. Syde (1951) 37 Cal.2d 765, 768 [235 P.2d 601]), the court held that there had been no error in the giving of such an instruction. (109 Cal.App.3d at pp. 713-714.)
Inexplicably, none of these cases addressed the due process and jury trial rights which are arguably violated by such an instruction. That omission is *733particularly surprising in view of the fact that the rule prohibiting directed verdicts was enunciated as early as 1895 by the Supreme Court in Sparf and Hansen v. United States, supra, 156 U.S. 51. Perhaps the courts in McCalla, Marvin, and Dutton may be forgiven for failing to address the issue because of the relative age and/or obscurity of that case. However, the Skelton court could not rely on this excuse. By 1980, when that case was decided, the rule had been soundly reaffirmed by the high court two times— in Brotherhood of Carpenters and Martin Linen Supply Co. —and the basis for the rule reaffirmed twice more in Winship and Sandstrom.21
Moreover, in light of the analysis in United States v. Johnson, supra, 718 F.2d 1317 and other cases, the two premises discussed above (ante, p. 730) are questionable ones upon which to sustain the trial court’s instruction. In many criminal cases, the prosecution’s evidence will establish an element of the charged offense “as a matter of law.” Similarly, in many instances, the accused will not seriously dispute a particular element of the offense. (Cf. People v. Garcia, supra, 36 Cal.3d at pp. 554, 556.) However, neither of these sometime realities of trial practice justifies the giving of an instruction which takes an element from the jury and decides it adversely to the accused. Such an instruction confuses the roles of judge and jury.22
In addition, if the “law/fact” distinction that the foregoing cases espouse is at all valid, it can only be in a very limited sense. As the Johnson majority observed, “The definition of a security is a matter of law. It is the *734judge’s duty to instruct the jury concerning that definition: the way in which a security is identified. Whether a particular piece of paper meets that definition, however, is for the jury to decide. Of course, the question whether a generic type of document, such as a traveler’s check or an equipment lease, may come within the reach of the statute’s prohibition is one of law. [Citations.]” (718 F.2d at p. 1321, fn. 13.)23
For all of these reasons, the trial court’s instruction here cannot stand. Instead of permitting the jury to find for itself that the note given Kurrle was a “security” within the meaning of section 25019, the trial court removed that issue from the jury and directed a finding on it. This was error, particularly since it was not a foregone conclusion that the note given to Kurrle was a “security” under the statute.24 To understand this point, it is necessary to examine the meaning of that term as it is used in section 25019.
The list of instruments which come within the statutory definition of a “security” (ante, fn. 9) is an expansive one. However, the cases have adhered to the principle that substance governs over form. “[A] literal interpretation [of the statute] has been uniformly eschewed when to do so would appear to exceed any legitimate legislative purpose.” (People v. Schock (1984) 152 Cal.App.3d 379, 384-385 [199 Cal.Rptr. 327]; Leyva v. Superior Court (1985) 164 Cal.App.3d 462, 473 [210 Cal.Rptr. 545].)
*735Thus, the “critical question” the courts have sought to resolve in these cases is whether a transaction falls within the regulatory purpose of the law regardless of whether it involves an instrument which comes within the literal language of the definition. In Silver Hills Country Club v. Sobieski (1961) 55 Cal.2d 811, 813-816 [13 Cal.Rptr. 186, 361 P.2d 906, 87 A.L.R.2d 1135], for example, the court pursued that inquiry with respect to the sale of country club memberships even though the transaction involved a “beneficial interest in title to property” which was listed in the statute.25
The court engaged in a similar analysis in Fox v. Ehrmantraut (1980) 28 Cal.3d 127, 139 [167 Cal.Rptr. 595, 615 P.2d 1383], which involved the sale of the stock of an executive placement firm, even though “stock” is one of the instruments listed in section 25019. (28 Cal.3d at pp. 132-133, 137-138; see also id.., at p. 139 [“Bona fide agreements for the sale of services providing for profit sharing have been held not to come within the act, although profit sharing agreements, like stock, are included in the broad definition of security in section 25019”] ,)26
The California decisions involving instruments designated as “notes” are consistent with this principle. Over 40 years ago, in People v. Davenport (1939) 13 Cal.2d 681 [91 P.2d 892], this court observed that “it plainly was not the legislative intent that ‘every’ note or evidence of indebtedness, regardless of its nature and of the circumstances surrounding its execution, should be considered as included within the meaning and purpose of the act.” (Id., at p. 686.)27
*736In at least two cases, notes have been held to qualify as securities because the transaction falls within the regulatory purpose of the law. For example, in People v. Leach (1930) 106 Cal.App. 442 [290 P. 131], upheld in In re Leach (1932) 215 Cal. 536, 546 [12 P.2d 3], the Court of Appeal held that undersecured notes on real property were “securities” on the ground that they were “unload[ed] upon a trusting public ... for a consideration far in excess of their reasonable value” and, therefore, did not “protect the public against the imposition of [an] unsubstantial scheme . . . .” (106 Cal.App. at p. 450.)
Similarly, in People v. Walberg (1968) 263 Cal.App.2d 286 [69 Cal.Rptr. 457], the court found that unsecured, interest-bearing promissory notes which were issued for loans solicited to refurbish a hotel were “securities.” The court relied in part on the fact that the scheme “was quite as dangerous to investors as the typical blue-sky promotion of mining stocks and royalties.” (Id., at p. 291.)
These cases underscore the fact that the corporate securities laws do not contain an “all-inclusive formula by which to test the facts in every case. And the courts have refrained from attempting to formulate such a test. Whether a particular instrument is to be considered a security within the meaning of the statute is a question to be determined in each case. In arriving at a determination the courts have been mindful that the general purpose of the law is to protect the public against the imposition of unsubstantial, unlawful and fraudulent stock and investment schemes and the securities based thereon. [Citation.]” (People v. Syde, supra, 37 Cal.2d at p. 768.)
Some 25 years ago, this court in Silver Hills Country Club v. Sobieski, supra, 55 Cal.2d 811 introduced the concept of “risk capital” as a way to determine whether a transaction involves a “security.” “Section 25008 defines a security broadly to protect the public against spurious schemes, however ingeniously devised, to attract risk capital. . . . [f] . . . [The] objective [of the Corporate Securities Law] is to afford those who risk their capital at least a fair chance of realizing their objectives.” (Silver Hills, supra, 55 *737Cal.2d at pp. 814-815; accord Fox v. Ehrmantraut, supra, 28 Cal.3d at p. 139.)28
Thus, for example, “where the investor receives adequate collateral, no risk capital is contributed to the managerial efforts of the promoter and such business transaction does not come within the Corporate Securities Law.” (People v. Schock, supra, 152 Cal.App.3d at p. 386; see, e.g., Hamilton Jewelers v. Department of Corporations, supra, 37 Cal.App.3d at p. 336 [offer of sale of diamond with right to return it for full purchase price plus 5 percent interest not a security since no “risk capital” placed with the jeweler; diamond itself served as adequate collateral].)
The inadequacy of collateral, however, is not the only factor. As Silver Hills notes, ‘“a passive position on the part of the investor’ ” is also a factor relevant to whether a security is involved. (See 55 Cal.2d at p. 815, quoting Dahlquist, Regulation and Civil Liability Under the California Corporate Securities Act (1945) 33 Cal.L.Rev. 343, 360.)
This factor was the focus of this court’s analysis in People v. Syde, supra, 37 Cal.2d 765. Syde involved agreements between a promoter and parents for the production of films featuring their children. The contracts called for the payment of specified sums over the period of rehearsals and guaranteed the cast members a percentage of the gross receipts upon the sale or distribution of the film.
In analyzing whether the film contracts were “securities,” the court explained, “[i]t is settled that the Corporate Securities Law was not intended to afford supervision and regulation of instruments which constitute agreements with persons who expect to reap a profit from their own services or other active participation in a business venture. Such contracts are clearly distinguished from instruments issued to persons who, for a consideration paid, stipulate for a right to share in the profits or proceeds of a business enterprise to be conducted by others; and the court will look through form to substance to discover whether in fact the transaction contemplates the conduct of a business enterprise by others than the purchasers, in the profits *738or proceeds of which the purchasers are to share. [Citations.]” (People v. Syde, supra, 37 Cal.2d at pp. 768-769.)29
Applying these facts, the court held that the contracts did not constitute securities. “The artist invested in returns from his training and actual participation in the production of a film if profits were realized from a sale thereof. It was not contemplated that he was to play the passive role of an investor only. True the direction in the production and the marketing of the film lay exclusively in the management of the defendants. But the film from which the artist was to profit could not be produced without his actual participation as a member of the cast.” (Id., at p. 769.)
The court in People v. Coster (1984) 151 Cal.App.3d 1188 [199 Cal.Rptr. 253], employed a similar analysis, reaching a contrary conclusion on its facts. There, the notes given the investors provided both a fixed return and a percentage of the gross company income. The court found that the transaction came within the purpose of the securities law since “the latter payment obviously depended on the success of the business” (151 Cal.App.3d at p. 1195), which “defendant managed, controlled and operated. ...” (Id., at p. 1194.) “[T]he investors had no authority in its conduct; the profit on their investments depended solely on defendant’s expertise, skill, and honesty. . . . [T]hey may be described as ‘relatively uninformed’ regarding the operation of defendant’s business.” (Ibid.)
The Attorney General contends that the foregoing cases are inapposite since they involved “investment contracts” rather than “promissory notes.” He claims that evidence of an investor’s active participation in a business is irrelevant where the instrument is denominated a “promissory note” since on its face a promissory note contemplates a guaranteed rate of return of both principal and interest. Thus, he argues, an investor’s participation in the business, even if substantial, cannot affect the investment and the transaction should be subject to securities regulation.
This argument is without merit. The return on any investment which has not been secured with adequate collateral depends on the success of the business. This is true whether the investment contemplates a percentage of the profits or a fixed return. When an investor entrusts money or other *739consideration to a promoter through any arrangement but retains substantial power to affect the success of the enterprise, he has not “risked capital” within the meaning of the Corporate Securities Law. In such transactions, that law should not govern.
Moreover, a rule which brings an undersecured “promissory note” within the ambit of the Corporate Securities Law simply because it guarantees a fixed return would be illogical in situations where the note is part of a transaction which contemplates substantial investor participation. Such a rule would place undue emphasis on the label attached to a particular instrument, ignoring the dictate that the courts must look to the substance of the transaction to determine whether protection of the securities laws is necessary.
There is an additional consideration. Many “investment contracts”—instruments which concededly permit consideration of investor participation in determining whether they constitute “securities”—contemplate both a variable and a fixed return. The investment contracts in Coster, for example, purported to give the investor a 20 percent “fixed” return on principal and 1 percent of the gross company income. (151 Cal.App.3d at pp. 1191-1192.) Both kinds of return, as well as a recoupment of principal, depended on the success of the business, which in turn depended upon the efforts of the promoter. It would be illogical to permit consideration of evidence of investor participation in that instance to determine whether the transaction should be subject to securities regulation while forbidding it in a promissory note transaction simply because the promised return in the latter is to take the form of interest at a “fixed” rate.
Finally, at least one case involving a promissory note has looked to investor participation in determining whether a note was a “security.” People v. Schock, supra, 152 Cal.App.3d 379 involved fractional interests in promissory notes and related deeds of trust. In concluding that the notes were “securities,” the court relied on the fact that the “investors possessed no real knowledge or control over the [business]. The passive role occupied by the investors compelled full reliance on [defendant’s company] for the success or failure of the common enterprise.” (Id., at p. 388, fn. 6, italics added;30 accord Leyva v. Superior Court, supra, 164 Cal.App.3d at pp. 472-475.)
*740It is evident from the foregoing analysis that Kurrle’s participation in appellants’ business was relevant to the issue of whether the “Corporation Promissory Note” was a “security.” Therefore, not only was it improper for the court to take the issue from the jury, but consideration of that evidence, by the jurors was essential to determine that issue.
For example, it is noteworthy that appellants’ initial offering through the newspaper ad contemplated “[ajctive or nonactive” partners. From the time of their first meeting, Kurrle’s active participation in the Figueroa businesses was encouraged. Kurrle not only talked to Joseph with the idea of “getting involved in the company actively, possibly in the sales area or management area,” but Joseph made it clear that he would be made an officer in at least one of the corporations “immediately or fairly immediately” after he invested. Eventually, Kurrle did begin working in the office. He became secretary/treasurer of Financial and Insulation, was a signatory on the company bank accounts, had a telephone listing, as “Arlo Kurrle, Financial Consultant,” and obtained a business license. The work he did for Joseph and Financial consisted of updating loan source lists and contacting potential lenders under a “finder’s fee” arrangement with Joseph. He also developed a demonstration kit used by Dennis in his sales presentations and accompanied Dennis on calls.31
It may be, of course, that these aspects of Kurrle’s participation were mere “window dressing” and that in fact, the success of his investment was never intended to depend on his “professional or managerial skill [or the] authority corresponding with his responsibility . . . .” (Coster, supra, 151 Cal.App.3d at p. 1194.) The record does suggest that appellants had no real intention of employing Kurrle’s talents in managing any of the three companies and that they contemplated that only their skill and services would determine the fate of the investment.
However, resolution of this question was for the jury in the first instance, not for the trial court. That resolution was further complicated by the court’s ruling excluding evidence regarding Kurrle’s contemplated participation in the business. Thus, in the event of a retrial, the trial court should permit such evidence. It should also, at a minimum, instruct the jury in the statutory definition of a “security.” Should appellant request additional instruc*741tions on the “investor passivity” factor, the trial court should give an appropriate instruction to conform to the evidence presented.32
IV.
“Put simply, the right to be tried by a jury of one’s peers finally exacted from the king would be meaningless if the king’s judges could call the turn.” (United. States v. Spock, supra, 416 F.2d at p. 181, fn. omitted, citing Bushell’s Case, 124 Eng. Rep. 1006 (C.P. 1670).) On the issue of whether a “security” had been offered or sold to Kurrle, the trial judge did not confine himself to instructing the jury about abstract legal principles or commenting on the evidence. He usurped the jury’s province and applied the law to the facts as he understood them. The court’s instruction erroneously removed an element of the section 25110 charge from the jury’s consideration.
In addition, the trial court erred in refusing to instruct the jury that appellants were required only to raise a reasonable doubt as to whether the offering was exempted from the qualifications requirement of section 25110. The court compounded that error by instructing that it was unlawful to offer or sell any security unless the security had been “exempted with the Commissioner of Corporations.” These errors require reversal of the judgment. On retrial, the trial court should permit evidence of Kurrle’s participation in appellants’ businesses.
The judgment is reversed.
Mosk, J., Broussard, J., Grodin, J., and Takei (Taketsugu), J.,* concurred.