A federal registration becomes effective this morning. Before offering the security to your customer, you still need to establish its status in the customer's state.
You represent a broker-dealer, a firm that handles securities transactions. The issuer creates the security; the state's Administrator administers its securities law.
Under §301, you may offer or sell a security in a state only when one of these conditions applies:
- Its state registration is effective.
- The security or transaction is exempt from state registration.
- It is a federal covered security, one protected by federal law from state registration requirements.
An effective date is when registration becomes operative. Submitting a registration statement, the offering's disclosure filing, does not permit sales. Once registration statements are filed under both this Act and the Securities Act of 1933, §402(b)(12) permits offers, but not sales, while no stop or refusal order is in effect or proceeding is pending. Check for effectiveness before selling. These procedures follow the 1956 Uniform Securities Act, as amended; state enactments vary.
Common mistakes
- Treating federal effectiveness as sufficient when the coordination filing has only eight of ten required calendar days.
- Choosing filing because net worth is $4 million while ignoring the separate 500-holder and other eligibility conditions.
- Treating the [5]-business-day filing method as the Rule 506 notice due 15 days after the first state sale.
Bottom line
- Offers and sales require effective registration, an applicable exemption, or federal covered status.
- Coordination requires federal effectiveness, ten calendar days, two full business days for pricing, and satisfied stop-order conditions, unless waiting periods are waived.
- Filing requires the complete §302 eligibility test and the model [5]-business-day period unless shortened.
- Qualification becomes effective by Administrator order.
Exam shortcut
Classify the security before counting days. An exemption or federal covered status may eliminate the registration-method question. Circle the triggering event: initial offer, first state sale, federal effectiveness, or Administrator order. Similar deadlines start from different events. Label each number as calendar days, business days, months, or years before comparing dates. In eligibility questions, look for one failed condition. Strong finances cannot cure missing ownership, reporting, or underwriting requirements.
The full lesson (about 2,641 words, 18 min read) adds 2 worked examples, all 5 common mistakes, a self-check, free in the app.
Learning objectives
- E8
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