9.7 - Methods of State Registration of Securities

As a federal covered security, the KAPCO Growth Fund is required to notice file under the laws of State A. State A's Administrator can require the issuer to provide copies of A) the schedule of compensation to the fund manager B) a report of the amount of the federal covered security sold in the state C) proxy statements D) a listing of the officers and directors of the issuer

Answer: B Because those companies which are required to notice file are levied a fee based on the amount of securities sold in the state, information relating to the amount of sales in the state must be reported.

A closed-end investment company is registered under the Investment Company Act of 1940. Its shares trade on the Nasdaq Stock Market. To qualify their shares for sale in the state, they would probably use: A) supplementation. B) notice filing. C) coordination. D) qualification.

Answer: B Regardless of where shares of this closed-end investment company trade, like all investment companies registered under the Investment Company Act of 1940, it is a federal covered security. The company is basically exempt from state registration and is only required to follow a procedure known as notice filing.

A manufacturing company is in the process of registering a securities issue with the SEC. In order to make the shares available for sale in this state, the method of registration that would most likely be used is: A) coordination. B) notice filing. C) qualification. D) notification.

Answer: A Coordination is the method used for nonexempt companies that are registering with the SEC. Qualification is for intrastate registration of those companies not registered with the SEC. Notice filing is the procedure whereby federal covered investment companies notify the states in which they want to issue shares and to whom they must pay a fee.

Under Section 303 of the Uniform Securities Act, in order for an issue to register using coordination, it must simultaneously register under the provisions of the: A) Securities Act of 1933. B) Uniform Securities Act. C) Securities Exchange Act of 1934. D) Investment Company Act of 1940.

Answer: A Registration by coordination is a form of state registration which coordinates state registration of a security with simultaneous federal registration of that security. Securities are registered at the federal level under the Securities Act of 1933.

Which method of securities registration would most likely be used to register an initial public offering that is intended to be offered for sale in several states? A) Coordination. B) Notice filing. C) Qualification. D) Registration by publication.

Answer: A Since the offering will be made in more than one state, registration with the SEC is required. Coordination is concurrent registration with the SEC and the state for public offerings. Notice filing pertains to certain federal covered securities, primarily by investment companies (mutual funds).

Registration by qualification is effective: A) 20 days after the filing date. B) when determined by the Administrator. C) when the federal registration becomes effective. D) no earlier than 10 days after the filing date.

Answer: B Registration by qualification is effective when determined by the Administrator. Qualification is the only form of registration where the timing of the effective date is determined by the Administrator.

Registration statements for securities: A) need not be filed with the Administrator if the securities are only sold in one state. B) may be amended after their effective dates as to the amount of securities issued, provided that underwriting fees and the initial offering price have not changed. C) expire on December 31 of each year and must be renewed if further sales are to be continued. D) are effective for at least two years from their effective dates, or longer if the securities are still under distribution by the underwriters.

Answer: B Registration of securities under the USA may be amended after their effective dates as to the amount of securities issued, provided that underwriting fees and initial offering prices have not changed. Securities registration statements remain effective for one year from their effective date, and do not expire on December 31 of each year. Registrations of agents, investment advisers, and broker/dealers expire on December 31 and need to be renewed. Registration statements are effective for one year from their effective dates (or longer if the securities are still under distribution by the underwriters).

All of the following statements relating to the USA's provisions dealing with the registration of securities are correct EXCEPT: A) the NSMIA preempted the state registration of certain securities known as federal covered securities. B) notice filings cannot be required of federal covered investment company securities as they are exempt from the registration requirements of the USA. C) a corporation registering a new issue with the SEC and wishing to sell in the state may register by coordination. D) any registrant may use qualification, even if it has filed a concurrent registration with the SEC.

Answer: B The NSMIA did take the registration powers away from the states for certain securities, defined in the law as federal covered securities. However, the states still have the right to require notice filings in order to, among other things, determine the appropriate fee to charge the registrant. Coordination is the usual method when registering with the SEC and the state at the same time. While not the expected practice, any security may register using qualification, even if it has an SEC registration in process.

Under the National Securities Markets Improvement Act of 1996 (NSMIA), investment companies registered under the Investment Company Act of 1940 are required to register: A) as exempt securities, at neither state nor federal levels. B) as securities at the federal level only. C) as securities at the state level only. D) as securities at both state and federal levels.

Answer: B The NSMIA requires that the SEC, rather than individual states, assume responsibility for the registration and regulation of federal registered mutual funds and other investment companies. Thus, these federal registered investment companies are no longer required to register at the state level; however, they will likely have to pay state filing fees by going through the notice filing procedure.

A prospectus for securities registered by qualification must be given to each offeree: A) only upon request of the offeree. B) prior to or concurrent with the sale. C) prior to or concurrent with the filing of the registration statement. D) prior to or concurrent with the effective date.

Answer: B There is no prospectus prior to or concurrent with the filing. Since the prospectus is not available until the effective date, one can't be distributed prior to the effective date.

A notice filing would be most appropriate for which of the following new issues? A) Intrastate offering. B) Railroad equipment trust certificate. C) Open-end investment company shares. D) Federal credit union shares.

Answer: C Investment companies registered under the Investment Company Act of 1940 are exempt from registration with the states under the NSMIA. However, most states require notice filing and the payment of fees. Federal credit union shares and railroad equipment trust certificates are exempt securities and intrastate issues would have to register using qualification.

An issuer of federal covered securities, whose registration is effective under the Securities Act of 1933, would use which of the following procedures to permit sale of its securities in a specific state? A) Qualification. B) Registration. C) Notice filing. D) Coordination.

Answer: C Notice filing is the procedure by which federal covered securities, most commonly registered investment company securities, receive clearance for their securities to be sold in a specific state. No formal registration is required, but payment of fees and filing of certain documents may be.

What is the procedure by which federal covered securities, registered under the Investment Company Act of 1940, file their offerings with state securities Administrators? A) Coordination. B) Federal covered securities need not file with state securities Administrators. C) Notice filing. D) Qualification.

Answer: C Notice filing primarily applies to securities issued by investment companies, such as mutual funds, registered under the Investment Company Act of 1940. Offerings of securities that are not federal covered securities must be registered with the states by either coordination or qualification, unless exempt.

When using the process of registration by coordination under the Uniform Securities Act, issuers shall simultaneously submit to the state, the documents filed with the SEC under the: A) Securities Exchange Act of 1934. B) Investment Company Act of 1940. C) Securities Act of 1933. D) National Securities Markets Improvement Act (NSMIA).

Answer: C Under the Uniform Securities Act, an issuer registering its securities with the Securities and Exchange Commission (SEC) in accordance with the procedures found in the Securities Act of 1933 shall use the documents it submits to the SEC in its concurrent registration with states in which it plans to offer its securities.

XYZ Corporation has been in business for more than 20 years. They need additional capital for expansion, and they determine that a public offering in their home state and neighboring states is appropriate. Which method of securities registration would most likely be used to register this initial public offering? A) Registering by application. B) Registering by qualification. C) Providing notice filing to those states in which shares are to be issued. D) Registering by coordination.

Answer: D Because this offering is being made in more than one state, SEC registration is necessary. The state registration method would be coordination, which is the simultaneous registration of a security with both the SEC and the states.

Which of the following statements regarding state registration of securities is TRUE? A) Notice filing is effective when ordered by the Administrator. B) Registration by qualification is effective after 30 days. C) Registration by coordination is effective on the 10th day after filing with the Administrator. D) Registration by coordination is effective concurrent with federal registration.

Answer: D Coordination is the method used to register a security simultaneously under the Securities Act of 1933 and under the USA in a state. If the security's federal registration is pending and the Administrator has received all of the required material, the two registrations can be declared effective at the same time.

In which of the following does registration of an issue become effective when ordered by the Administrator? A) Coordination. B) Integration. C) Notice filing. D) Qualification.

Answer: D The effective date of registration by qualification is set by the Administrator. The effective date under registration by coordination is set by the SEC, and notice filing is merely the filing of certain documents in order for the registrant to be able to offer securities in that state.

In the event that a filing with the state securities Administrator is found to have material misstatements or omissions, a correcting amendment must be filed: A) within seven business days of the discovery. B) with the Administrator and the SEC Fraud Division within five business days of the discovery. C) with a new consent to service of process. D) promptly.

Answer: D If a filing with the Administrator is found to have material misstatements or omissions, an amendment must be filed promptly with the office of the Administrator.

Under the Uniform Securities Act, which of the following is TRUE regarding the registration of securities? A) Registration by coordination becomes effective on a date ordered by the Administrator. B) The Administrator may require that a prospectus be delivered to every purchaser of a registered security no sooner than the time at which the security is delivered. C) The effectiveness of a registration statement assures the accuracy of the information contained in the statement. D) State registration by coordination is available only if a federal registration statement has been filed under the Securities Act of 1933 in connection with the same offering.

Answer: D Registration by coordination becomes effective simultaneously with the federal registration. A prospectus may be delivered at or prior to the time actual delivery of the security is made. The act prohibits any statement or implication that registration involves approval of accuracy of facts by the Administrator. The federal registration statement is what the state registration is being coordinated with.

When a security is being registered under coordination, all of the following are required EXCEPT: A) a description of the proposed use of the proceeds of the underwriting. B) prompt filing with the Administrator of any amendments filed with the SEC. C) payment of the appropriate fee. D) filing with the Administrator of a statement of the maximum and minimum proposed offering price and maximum underwriting discounts or commissions concurrently with the filing of the registration statement with the SEC.

Answer: D The statement of the maximum and minimum proposed offering prices and the maximum underwriting compensation must be filed at least two full business days before the effective date, not with the initial filing.

Under the Uniform Securities Act, one method of securities registration is Qualification. When that method is used, which of the following statements is CORRECT? The registration is valid for one year from the effective date. The registration is valid for one year from the effective date unless the underwriter or issuer still has some unsold shares. The registration is valid until the next December 31st. The registration statement may be amended to increase the number of shares in the offering as long as the public offering price and the underwriter's compensation is not changed. A) I and IV. B) II and III. C) I and III. D) II and IV.

Answer: D Under the USA, when a security is registered, the registration is valid for one year after the effective date. However, the act provides that if the issuer or underwriter still has unsold shares from the offering, the effective date may be extended so this is a more accurate choice. The act also allows the registration statement to be amended to allow for an increase in the number of shares to be offered as long as the public offering price and the underwriter's compensation is not changed.

Registration statements for securities under the Uniform Securities Act are effective for: A) one year from the previous December 31. B) one year from the effective date. C) a period of time determined by the Administrator for each issue. D) one year from the date of issue.

Securities registration statements are generally effective for one year from the effective date.