Unit 8 Regulation of Securities and their Issuers
agent
(aka stockbrokers or registered representatives) represent broker dealers in dealing with customers
NOT securities
-Cash and currency -fixed annuities (interest in retirement plan like IRA or 401K) -life insurance (whole and term) -condominiums used as a personal residence -commodities and future contracts -collectibles
The Administrator may deny or revoke the registration exemption of...
-any security any person organized and operated not for private profit but exclusively for religious, educational, benevolent, fraternal, or charitable purposes (basic nonprofit exemption) -any investment contract issued in connection with an employees' stock purchase, savings pension, profit-dharing or similar benefit plan
state registration methods
-notice filing -coordination -qualification
SEC Rule 506
A private placement where there is no dollar limit on the amount sold
Question #18 of 18 All of the following must be specified in the state registration statement of the security except A) the total amount of the security that will be offered in each state. B) the total amount of the security that will be offered in this state. C) a stop order from any other state that affects the offering of the security within that state. D) all other states where the security is currently registered or will be registered.
A) the total amount of the security that will be offered in each state It is not necessary to list the total amount of the security to be offered in all states. However, for filing fee purposes, the amount to be sold in this state must be disclosed.
Question #3 of 21 (Q Bank Quiz 2) Which of the following transactions are not exempt from registration? A) Unsolicited nonissuer transactions B) Isolated nonissuer transactions C) Transactions with pension or profit-sharing trusts D) Transactions with intrastate manufacturing companies
D) Transactions with intrastate manufacturing companies A transaction with a corporation that is not a financial institution is neither an exempt transaction nor exempt from the registration rules.
Question #7 of 21 (Q Bank Quiz 2) Under the Uniform Securities Act, all of the following are exempt transactions except A) unsolicited customer orders. B) a transaction executed by a trustee in bankruptcy. C) an isolated nonissuer transaction. D) a sale of a primary offering registered with the SEC.
D) a sale of a primary offering registered with the SEC. In almost every instance, an issuer transaction—that is, one for the benefit of the issuer—will not be considered an exempt transaction. Exempt transactions include isolated nonissuer transactions; transactions between an issuer and an underwriter; transactions by an executor, Administrator, sheriff, marshal, trustee in bankruptcy, guardian, or conservator; any sale or offer to a bank, savings institution, investment company, or other financial institution; and private placements.
regulation of investment advisers federal level
Investment Advisers Act of 1940
regulation of securities federal level
Securities Act of 1933
brokers dealers and agents federal level
Securities Exchange Act of 1934
Federal Covered Security
Security exempt from state registration.
Special Subscription Form
The Administrator may also require, as a condition of registration, that the issue be sold only on a form specified by the Administrator and that a copy of the form or subscription contract be filed with the Administrator or preserved for up to three years
brokers dealers and agents state level
Uniform Securities Act
regulation of investment advisers state level
Uniform Securities Act
regulation of securities state level
Uniform Securities Act
stop order
Used to deny effectiveness to, or suspend or revoke the effectiveness of, any registration statement (security) -issued by administrator
registration statement
a statement filed with the SEC that discloses all material information concerning the corporation making a public offering -signed by CEO, CFO, and majority of board of directors
it is unlawful for any person to offer or sell any security in this state unless...
(1) it is registers under this act or (2) the security or transaction is exempted under this act or (3) it is a federal covered security (exemptions apply to the security or transaction only not to the securities professional)
preorganization certificates
(exempt transactions under the Uniform Security Act) An offer or sale of a preorganization certificate or subscription is exempt if: - no commission or other remuneration is paid or given directly or indirectly for soliciting any subscriber, - the number of subscribers does not exceed 10, and - no payment is made by any subscriber.
non-issuer transaction
-purchase or sale of security whereby issuer doesn't benefit directly or indirectly -referred to as secondary trading
Federal Covered Securities
-securities issued by an open end or closed end investment company, UIT, or face amount certificate coming that is registered under the investment company act of 1940 -Includes new securities issued by companies whose securities already trade on a national securities exchange like the New York stock exchange -securities offered pursuant to the provisions rules 506b or 506c of regulation d under the securities act of 1933 -most securities exempt from registration under the securities act of 1933. States cannot overstep what gov says does not have to register. (municipal bonds,) *if municipal issuer is located in the state in which the securities are being offered that security is not considered a federal covered security *the Uniform securities act allows states to impose filing fees (notice filing) on investment company securities although they are federal covered securities
cooling-off period
-the registration can become effective 20 days after the SEC has received it, usually it takes longer during the cooling-off period underwriters may not -take orders -distribute sales literature or advertising material they may -take indications of interest -distribute preliminary prospectuses -publish tombstone advertisements
Exempt Transactions under the securities act of 1933
-transactions by any person other than an issuer, underwriter, or dealer (private transactions between individuals) -transactions by an issuer that do not involve a public offering (private placement under regulation D)
Preliminary (red herring) prospectus
-used to acquaint investors with essential facts concerning the new issue, and can solicit indications of buyer interest -made available from the time the issue is filed until it becomes publicly available for sale cannot be used -as confirmation of the sale -in place of a registration statement -to declare the final public offering price not included in it -public offering price -effective date
! registration statement may be amended after its effective date to change the number of shares to be offered and sold to the public if ...
....if the public offering price and underwriter's discounts and commissions are unchanged
Registration by Coordination
A process that allows A security to be sold in a state. It is available to an issuer that files for the security's registration under the Securities Act of 1933 and files duplicates of the registration documents with the state administrator. The state registration becomes effective at the same time the federal registration statement becomes effective.
Registration by Qualification
A process that allows a security to be sold in a state. It is available to an issuer who files for the security's registration with the state Administrator, meets minimum net worth, disclosure, and other requirements, and files appropriate registration fees. The state registration becomes effective when the Administrator so orders.
Question #16 of 21 (Q Bank Quiz 1) A client of a broker-dealer calls his agent and submits an order to purchase 1,000 shares of a Peruvian copper mining company. As the order ticket is being prepared, the agent notices that this is a nonexempt unregistered stock. The agent should A) continue to process the order because this is an exempt transaction. B) inform the client that no orders for this stock may be accepted until it is properly registered in the state. C) continue to process the order because this is an exempt security. D) wait for firm approval before processing the order.
A) continue to process the order because this is an exempt transaction. Transactions resulting from unsolicited orders are exempt under the USA. Therefore, this order may be taken as placed.
Question #9 of 18 (Exam) Under the Uniform Securities Act, a private placement is considered an exempt transaction if A) the number of noninstitutional offers is limited to a maximum of 10 in any 12-month period. B) the sale is unsolicited. C) no payment is made with any purchase. D) the security is rated in the top three grades by a recognized rating agency.
A) the number of noninstitutional offers is limited to a maximum of 10 in any 12-month period. The transaction exemption available to private placements requires that no more than 10 offers be made in any 12-month period to noninstitutional (retail) purchasers. Whether individual or institutional, payment is made, but commissions may be paid only on institutional sales.
Common Enterprise
An enterprise in which the fortunes of the investor are interwoven with those of either the person offering the investment, a third party, or other investors
Rule 147 exemption
Any security offered and sold exclusively to persons resident within a single state can be exempt from registration requirements. Persons buying security must have their primary residence in the state. - For 6 months from the date of last sale by the issuer, resales of any part of the issue will only be made to persons resident within the same state or territory - 80% of issuer's gross revenue must be derived from operations within state - 80% of proceeds of offering must be used for business purposes within state -80% of issuer's assets must be located within the state -a majority of the issuers employers must be located in the state
Question #10 of 21 (Q Bank Quiz 1) Which of the following securities are federal covered and exempt from state registration? I. Bonds of an issuer whose common stock is listed on the NYSE II. Bonds of an issuer whose common stock is listed on the NYSE American LLC (formerly known as the American Stock Exchange [AMEX]) III. Stock traded on Nasdaq IV. Registered investment company securities A) I and II B) III and IV C) I, II, III, and IV D) I, II, and IV
C) I, II, III, and IV All securities of an issuer whose common stock is listed on any national exchange or any tier of the Nasdaq Stock Market are exempt from state registration, including any securities of the same issuer senior to such securities. All registered investment company securities are also exempt from state registration.
SEC Rule 506b
Companies seeking raise in capital through a private placement can sell an offering to an unlimited number of accredited investors and up to 35 nonaccredited investors
Registrant
The person registering the securities
Exempt securities under the securities act of 1933 (federal)
The securities act of 1933 makes it unlawful to sell or deliver a security through any instrument of interstate commerce unless a registration statement is in effect. To be exempt from federal registration... -any security issued or guaranteed by the US, any state, or any policial subdivision of a state -any commercial paper that has a maturity date at the time of issuance of no more than nine months(270 days) -any security issues by a person organized and operated exclusively for religious, educational, benevolent, fraternal, or charitable purposes and not for pecuniary profit -any interest in a railroad equipment trust -any security issued by a federal or state bank, savings/loan association, or similar institution (*not bank holding companies)
Escrow
administrator may require that a security be placed in escrow if the security is issued: -within the past three years, -to a promoter at a price substantially different that the offering price -to any person for a consideration other than cash
The Securities Act of 1933
aka. Paper Act, the Truth in Securties Act, or the Prospectus Act An act that regulates the sale of securities to the public via the primary market. - It required that companies register their securities sold to the public with the SEC and that investment bankers must provide full and accurate information related to new securities issues to potential investors.
Rule 147A
allows company incorporate out of state as long as has a principal place of business in the state
registration by notice filing
an opportunity for the states to collect revenue in the form of filing fees as the Administrator has limited powers to review any documentation filed within her department -generally lower filing fees than the other forms of registration
underwriter
any person. usually a broker-dealer, who has purchased security from an issuer with a view to selling
Initial Public Offering (IPO)
the first time a company issues stock that may be bought by the general public
Issuer
the individual or business organization offering a security for sale to the public
The burden of providing an exemption from a definition falls on...
the person claiming it (under the USA)
Additional Primary Offering (APO)
when additional shares of an issue are offered to the public by the issuer; after the IPO because the company wishes to raise additional equity capital
Unsolicited brokerage transactions
(exempt transactions under the Uniform Security Act) most common form • client contacts agent & asks agent to buy/sell security; USA Licensing & registration, • not solely based on passing exam • noon on the 30th day of submitting • 30th day on noon after completed application has been filed • many times Administrator requests additional information
isolated nonissuer transactions
(exempt transactions under the Uniform Security Act) Transactions on the secondary market that occur infrequently
Question #11 of 21 (Q Bank Quiz 1) Which of the following is not an exempt transaction as defined in Section 402 of the Uniform Securities Act? A) Isolated sale of a corporate bond on behalf of the bond's issuer B) Sale of XYZ common stock, traded on the OTCQB, to an individual investor by the executor of an estate C) Corporate bond sale to an insurance company D) Sale of common stock by the county sheriff at the request of the state securities Administrator
A) Isolated sale of a corporate bond on behalf of the bond's issuer First of all, don't panic when you see a section number—just answer the question based on the specific topic—in this case, the definition of an exempt transaction. An isolated sale of a corporate bond on behalf of the bond's issuer is not exempt. Under the USA, only isolated nonissuer transactions are exempt. In this question, the transaction is on behalf of the issuer, so this transaction is not exempt. The sale of a corporate bond to an insurance company is the sale of a security to a financial institution; this is an exempt transaction. A sale of common stock by the executor of an estate or by the county sheriff is considered a fiduciary transaction and is exempt, regardless of the client or the type of security.
Question #4 of 21 (Q Bank Quiz 1) One method of securities registration under the Uniform Securities Act is qualification. The effective date of a security registered using this method is A) by noon of the 30th day following the filing of the application. B) within 2 business days of the filing of maximum and minimum proposed offering prices. C) when so ordered by the Administrator. D) when the offering is made effective by the SEC.
C) when so ordered by the Administrator. Registration by qualification becomes effective on the date set by the Administrator. It is the registration of a security by coordination, where the effective date is contingent upon SEC effectiveness. Coordination also has the requirement of submitting the maximum and minimum offering prices at least two business days before the effective date. It is the registration of securities professionals that is effective at noon of the 30th day after the filing of a complete application.
Exempt securities under USA
Securities exempt from state registration are also exempt from state filings of sales literature 1. US and Canadian municipal securities 2. Foreign government securities - political subdivisions not included 3. Depository Institutions - includes a)any security issued by and representing an interest in or a debt of or guaranteed by any bank organized under the laws of the USA or any bans, savings institution or trust company (b) Any security issued by and representing an interest in or a debt of or guaranteed by any federal savings loan, or building and loan association (c) Any security issued by any federal credit union or any credit union, industrial loan association, or similar supervised under the laws of the state 4. Insurance company securities - the stocks and bonds issued not the variable life policies or annuities sold by the companies 5. Public Utility Securities (ex issued by a railroad) 6. Federal Covered Securities 7. Securities issued by nonprofit organizations 8. Securities issued by cooperatives 9. Securities of employee benefit plans 10. Certain money market instruments (ex commercial paper and banker's acceptance)
Filing the Registration Statement
filed by the issuer (but could also be by the selling stockholder or broker-dealer) -amount of securities issued in the state -states in which the securities are to be offered -any adverse order concerning the court, authorities or SEC -anticipated effective date -anticipated use of the proceeds
security
must constitute 1) an investment of money 2) in a common enterprise 3) with the expectation of profits 4) to be derived primarily from the efforts of a person other than the investor
Administrator
office or agency that has the complete responsibility for administering the securities laws of the state----has jurisdiction over the registration, orders, suspension, and revoking of securities professionals and securities
Final Prospectus
part of the final registration statement prepared by a company prior to an IPO that contains all the details of the offering, including the number of shares offered and the offer price
Section 506c
permits the offering to be advertised as long as -all purchasers are accredited investors -the issuer takes reasonable steps to verify that all purchasers are accredited investors
Question #12 of 21 (Q Bank Quiz 1) Under the Uniform Securities Act, the sale of stock of a state bank is exempt from which of the following? I. Prospectus requirements II. Antifraud provisions III. Registration requirements A) I and III B) I only C) I, II, and III D) I and III
A) I and III Both the Uniform Securities Act and the Securities Act of 1933 exempt securities issued by banks, trusts, or savings and loans. While the security is exempt under both acts from registration and prospectus delivery requirements, it is never exempt from the antifraud provisions of the acts.
Question #19 of 21 (Q Bank Quiz 2) The National Securities Markets Improvement Act of 1996 (NSMIA) created a new definition known as a covered security. In general, these securities do not have to register on a state level. If XYZ common stock is listed for trading on the NYSE, which of the following XYZ securities are considered covered? I.XYZ participating preferred stock II. XYZ first mortgage bonds III. Warrants to purchase XYZ common stock IV. Rights issued in advance of an offering of additional XYZ common stock A) I and IV B) I, II, III, and IV C) I, II, and III D) II and III
B) I, II, III, and IV Common stock listed on the New York Stock Exchange is a covered security as defined in the NSMIA. Furthermore, any security equal to or senior to that common stock is considered to be covered as well. Warrants and rights are equal to the common stock and the preferred stock and mortgage bonds are senior to the common stock.
Question #13 of 21 (Q Bank Quiz 1) Federal covered securities, as defined under the Uniform Securities Act, A) would not include securities senior to a common stock listed on the NYSE B) must be registered with the SEC before they can be offered in the state C) must be registered in the state before they can be offered within the state D) include shares of an investment company registered with the SEC under the Investment Company Act of 1940
D) include shares of an investment company registered with the SEC under the Investment Company Act of 1940 It is true that many federal covered securities are registered with the SEC. However, the term also includes those exempt from registration, such as government and municipal bonds. Although these investment company securities are exempt from registration in any state, the state may still require a notice filing, including a consent to service of process and payment of fees, for these offerings to be sold in the state. If the common stock is a covered security, as one listed on the NYSE would be, then any security with a senior claim, such as preferred stock or bonds, would also be considered federal covered.
Ongoing Reports
The Administrator may require the person who filed the registration statement to file reports to keep the information contained in the registration statement current and to inform the Administrator of the progress of the offering. These reports cannot be required more often than quarterly.
prospectus
any notice, circular, letter, or communication, written or broadcast by radio or TV that offers any security for sale or confirms the sale of a security -not oral communication
Issuer Transaction
proceeds of the sale go to the issuer
limited offering transactions
(exempt transactions under the Uniform Security Act) private placement with no more than 10 persons (offerees) including institutional investors during last 12 months •with belief that being purchased for investment purposes • no commission or advertising
underwriter transactions
(exempt transactions under the Uniform Security Act) transactions between issuer & BD when performing as underwriter • term also known as BD & the action they perform to assist issuer in launching new security
institutional investor transactions
(exempt transactions under the Uniform Security Act) • transactions with financial institutions including investment companies & no minimum order
Question #6 of 21 (Q Bank Quiz 1) If securities of an issuer registered with the state are outstanding, how long after the effective date of registration must an issuer wait before the registration may be withdrawn? A) 12 months B) 18 months C) Only at the Administrator's discretion D) 6 months
A) 12 months Registration statements are usually effective for a period of one year from the effective date and may not be withdrawn during this period if any of the securities of the issuer of the same class are still outstanding.
Question #20 of 21 (Q Bank Quiz 1) All of the following situations are exempt transactions complying with the requirements of the Uniform Securities Act except A) the executor of an estate liquidates 1,000 shares of IBM held by the estate. B) Broker-Dealer B offers a private placement to 15 regular public customers and closes the offering at the end of 30 days. C) Broker-Dealer A has put together a syndicate of 15 insurance companies and pension funds to purchase the entire issue of XYZ Corporation's preferred stock. D) Mammoth Mutual Fund purchased 250,000 shares of common stock in a nonissuer transaction.
B) Broker-Dealer B offers a private placement to 15 regular public customers and closes the offering at the end of 30 days. Under the Uniform Securities Act, an unregistered private placement may be offered to no more than 10 prospective purchasers, with the exception of financial institutions and other broker-dealers. Transactions by executors, the sheriff, marshals, receivers, trustees in bankruptcy, guardians, or conservators are exempt. Sales to financial institutions, such as mutual funds and insurance companies, are also exempt.
Antifraud Provision of the USA
applies to investment advisers, broker-dealers, securities. DOes not apply to anyone who is not defined as a an investment adviser or not defined as a security.
broker dealer
are in the busines of buying and selling securities for their customers (investors)
!Under the Uniform Securities Act, with respect to certificates of interest; participation in oil, gas, or mining titles or leases, or on payments out of production under such titles or leases, there is not considered to be any....
issuer
Bankruptcy, guardian, or conservator transactions
(exempt transactions under the Uniform Security Act) Transactions by an executor, administrator, marshal, sheriff, trustee in bankruptcy or other fiduciary are exempt transactions
Nonissuer transactions by pledgees
(exempt transactions under the Uniform Security Act) executed by a bona fide pledgee (the one who received the security as collateral for a loan)
Transactions with existing security holders
(exempt transactions under the Uniform Security Act) no commission is paid for sales
SEC Rule 501: Accredited Investors
1. Institutional Investors 2. employee benefit plans over $5 milliion 3. Insider of issuer 4. Invidiaul with one or joint net worth >$1mi & 5. earning over $200k annually or $300k for joint
Question #16 of 18 Which of the following is not an accredited investor? A) An individual with a net worth, including the value of her primary residence, that is greater than $1 million B) An individual whose income was greater than $200,000 in each of the two most recent years with a reasonable expectation of reaching that level again this year C) Any organization not formed for the purpose of purchasing securities with a net worth in excess of $5 million D) A registered open-end investment company with net assets of $600,000
A) An individual with a net worth, including the value of her primary residence, that is greater than $1 million An accredited investor can take different forms: an individual with a net worth, excluding the value of the principal residence, greater than $1 million (the $1 million can be joint with spouse); an individual whose yearly income for the past two years exceeded $200,000 ($300,000 joint with spouse) with a reasonable expectation of earning that amount this year; and any organization not formed for the purpose of purchasing the securities being offered with a net worth in excess of $5 million. In addition, any registered investment company, bank, or insurance company, regardless of size, is included in the definition of accredited investor in SEC's Rule 501.
Question #8 of 21 (Q Bank Quiz 2) Which of the following transactions would be included in the USA's definition of exempt transaction? I.A banker liquidating stock pledged as collateral for a loan that has gone into default II. An offer to purchase a new stock made to 5 individuals and 15 institutional investors in this state during the past 12 months III. An isolated nonissuer transaction IV. The sale of preorganization certificates to 10 individuals with no commission being paid A) I, II, III, and IV B)II and III C) III and IV D) I and II
A) I, II, III, and IV All of these are included in the USA's definition of an exempt transaction. Sales made by a bona fide pledgee are exempt. Even though the number of offerees in the private placement exceeds 10, that limitation does not apply to institutional investors. A preorganization certificate may be sold to as many as 10 persons, while a private placement may not be offered to more than 10 (not counting institutional investors).
Question #9 of 21 (Q Bank Quiz 1) Section 402(a) of the Uniform Securities Act contains a lengthy list of securities that are exempt from the registration and advertising filing requirements of the act. Included in that list would be all of the following except A) bonds issued by the city of Berlin, Germany. B) church bonds. C) municipal bonds. D) common stock listed on the NYSE.
A) bonds issued by the city of Berlin, Germany. Securities exempt from state registration include those issued by a U.S. or Canadian governmental unit, such as municipal bonds, and securities issued by nonprofit and charitable organizations, such as church bonds. However, bonds issued by a nonsovereign foreign government (cities, etc.) are not considered exempt securities unless guaranteed by the sovereign (Germany, in this case) government. Even before the NSMIA created the exemption for federal covered securities, those listed on the NYSE received what was called the blue-chip exemption.
Question #14 of 21 (Q Bank Quiz 1) As defined in the NSMIA, which of these are federal covered securities? I. .Open-end investment companies registered under the Investment Company Act of 1940 II. Closed-end investment companies registered under the Investment Company Act of 1940 that trade on the OTC Bulletin Board III. Bonds listed on the OTC Link where the company's common stock trades on Nasdaq IV. Bonds issued by the Province of Ontario A) I, II, and III B) I and II C) III and IV D)I, II, III, and IV
B) I and II Under the NSMIA, federal covered securities include all investment companies registered under the Investment Company Act of 1940, regardless of where they trade. Any stock listed on Nasdaq is federal covered, and that makes any security equal to or senior (like their bonds) also federal covered, regardless of where they trade. Canadian government and municipal securities are not federal covered (although, under the Uniform Securities Act, they are exempt securities).
Question #21 of 21 (Q Bank Quiz 2) The RAN Corporation's common stock is listed on the New York Stock Exchange. To raise additional working capital, RAN's board of directors has authorized the sale of $75 million in subordinated debentures. Under the Uniform Securities Act, which of the following is not a true statement? A) The Administrator can bring an enforcement action against the issuer if it is deemed that the issue is fraudulent. B) The Administrator can require the RAN Corporation to register the debentures prior to an offering in the state. C) The Administrator may require a filing fee to be paid prior to sales taking place in the state. D) The Administrator can require that the issuer provide a notice filing in the state.
B) The Administrator can require the RAN Corporation to register the debentures prior to an offering in the state. Because the RAN Corporation's common stock is listed on the NYSE, it (and any security equal or senior to it) is a federal covered security. As such, the state has no registration authority over the security. However, notice filing and payment of fees may be required. The Administrator always has the power to enforce antifraud statutes.
Question #14 of 18 (Exam) When a security is being registered under coordination, all of the following are required except A) none of these are exceptions. B) filing with the administrator 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. C) prompt filing with the administrator of any amendments filed with the SEC. D) a description of the proposed use of the proceeds of the underwriting.
B) filing with the administrator 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. 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.
Question #11 of 21 (Q Bank Quiz 2) A transactional exemption would be available under the Uniform Securities Act when an agent for a broker-dealer A)sells a retail client $10,000 of U.S. Treasury bonds. B) receives an unsolicited order from a client to purchase heating oil contracts. C) sells a large block of an unregistered nonexempt security to an insurance company that is not authorized to do business in this state. D) sells a large block of an unregistered nonexempt security to an individual who meets the definition of an accredited investor.
C) sells a large block of an unregistered nonexempt security to an insurance company that is not authorized to do business in this state. The sale of a security to an institution, such as an insurance company, is considered an exempt transaction. The fact that the company is not authorized to do business in the state only means that its securities would not be exempt, but that does not change the fact that this is a sale to an institution and is, therefore, exempt. The term accredited investor is meaningless here; only institutions qualify for exempt treatment, not rich people. The T-bonds are an exempt security, but the sale to a retail client is not an exempt transaction. Heating oil contracts are a commodity, not a security.
Question #17 of 21 (Q Bank Quiz 2) Which of the following is not an exempt transaction as defined in Section 402 of the Uniform Securities Act? A) Sale of common stock by the county sheriff at the request of the state securities Administrator B) Corporate bond sale to an insurance company C) Sale of XYZ common stock, traded on the OTCQB, to an individual investor by the executor of an estate D) Isolated sale of a corporate bond on behalf of the bond's issuer
D) Isolated sale of a corporate bond on behalf of the bond's issuer First of all, don't panic when you see a section number—just answer the question based on the specific topic—in this case, the definition of an exempt transaction. An isolated sale of a corporate bond on behalf of the bond's issuer is not exempt. Under the USA, only isolated nonissuer transactions are exempt. In this question, the transaction is on behalf of the issuer, so this transaction is not exempt. The sale of a corporate bond to an insurance company is the sale of a security to a financial institution; this is an exempt transaction. A sale of common stock by the executor of an estate or by the county sheriff is considered a fiduciary transaction and is exempt, regardless of the client or the type of security.
