Series 63 – Uniform Securities Agent State Law Exam Exempt Transactions and Securities 2 — Questions and Answers
Question 1: Under the USA, which condition must be met for the private placement exemption to apply?
- No commissions may be paid to any person for soliciting buyers
- The seller must have a reasonable belief that buyers are purchasing for investment, not resale (Correct answer)
- All buyers must be accredited investors
- The offering must be registered at the federal level
Correct answer: The seller must have a reasonable belief that buyers are purchasing for investment, not resale
For the private placement exemption, the seller must reasonably believe all buyers are purchasing for investment and not for immediate resale.
Question 2: Securities issued by a nonprofit charitable organization are exempt from state registration under the USA primarily because of what characteristic?
- They are sold only to institutional investors
- They are classified as exempt securities due to the nature of the issuer (Correct answer)
- They are covered securities under NSMIA
- They have maturities of less than nine months
Correct answer: They are classified as exempt securities due to the nature of the issuer
Securities issued by nonprofit charitable organizations are exempt securities because of the nature of the issuer, not the type of transaction.
Question 3: An underwriter who purchases securities from an issuer to resell to the public is engaged in what type of transaction?
- An exempt transaction (Correct answer)
- A covered transaction
- A registration by notification
- A secondary market transaction
Correct answer: An exempt transaction
Transactions between an issuer and an underwriter are exempt transactions under the USA.
Question 4: Under the USA, commercial paper qualifies as an exempt security if it has a maturity of no more than how many months?
- 3 months
- 6 months
- 9 months (Correct answer)
- 12 months
Correct answer: 9 months
Commercial paper with a maturity of nine months or less is exempt from registration under the USA as a short-term money market instrument.
Question 5: Which of the following is a 'covered security' that is exempt from state securities registration requirements?
- A security sold in a single state only
- An investment company security registered under the Investment Company Act of 1940 (Correct answer)
- A revenue bond issued by a municipality
- A corporate bond with a high credit rating
Correct answer: An investment company security registered under the Investment Company Act of 1940
Securities of investment companies registered under the Investment Company Act of 1940 are covered securities exempt from state registration under NSMIA.
Question 6: When a registered broker-dealer sells securities between existing customers without solicitation, this is known as which type of transaction?
- A listed transaction
- An unsolicited brokerage transaction (Correct answer)
- A private placement
- A directed transaction
Correct answer: An unsolicited brokerage transaction
An unsolicited brokerage transaction is one where the broker-dealer executes a trade at the customer's own initiative, which is an exempt transaction under the USA.
Series 63 – Uniform Securities Agent State Law Exam Exempt Transactions and Securities 2
Under the USA, which condition must be met for the private placement exemption to apply?