Question about securities?

Koscot has a multilevel network of independent distributors selling cosmetics. The beauty advisor is at the lowest level. They may purchase from Koscot at 45% discount. the supervisor is at the second level. For $1000 investment, the supervisor can receive 55% discount. Supervisor receives $600 for introducing a prospect who buys into program. For investment of $5000 the distributor may get a 65% discount. Distributor is entitled to $600 or $3000 respectively for bringing in prospects. Those who invested in the plan bring prospects to meetings and introduce them to the program. Koscot employees sell the prospects on the program. Investors sometimes participate directly in the sales pitch. They are required to follow the Koscot manual that says to drive to meetings in fancy cars, dress well, and flaunt money. Those who do not are dismissed from participation. Analyze the scheme and explain why Koscot is offering the security. How could Koscot structure the offering to avoid registration

A) As presented this opportunity does not qualify as being a "security"

B) The way this question is presented is somewhat stilted against the concept of "network marketing" which is entirely legal unless compromised by a disreputable or unscrupulous representative

C) Folks at higher ACHIEVEMENT levels receive incrementally higher compensation in all network marketing plans.