In 1946 the Supreme Court held that strips of a Florida orange grove, sold with a contract to tend and market the fruit, were securities. Every question here starts from that idea: is it a security, is it offered or sold in this state, and which legal door lets it be sold?
The Uniform Securities Act (USA) regulates securities, so your first question is always whether you are dealing with one. The North American Securities Administrators Association (NASAA), the association of state securities regulators, maintains the model Act. You study the 1956 Act as amended by NASAA; the 2002 revision differs where noted. Each state's Administrator is the official or agency that runs the Act. It registers securities and firms and enforces the rules. As an investment adviser representative (IAR), you use this definition to know when your advice is securities advice.
Section 401(m) answers what a security is under state law. The list includes:
- notes, stocks and treasury stock (shares the issuer has bought back);
- bonds, debentures and other evidences of debt;
Common mistakes
- Calling every annuity insurance: A variable annuity is a security with no insurance-company exemption.
- Counting buyers instead of offerees: Eleven individuals offered and four buyers means a count of 11, so the ten-offeree exemption fails.
- Demanding filings for listed securities: A listed stock owes the state nothing. A fund owes its federal filings, and a Rule 506 deal owes Form D within 15 days of the first in-state sale.
Bottom line
- Securities include stocks, bonds, investment contracts and the other Section 401(m) instruments; insurance and fixed annuities are not, while variable annuities are securities with no insurance exemption.
- Howey: money, common enterprise, expected profits, efforts of others ("solely" loosened); the GENIUS Act stablecoin exclusion takes effect no later than January 18, 2027.
- Federal covered (NSMIA): listed securities, registered funds, Rule 506 and Reg A Tier 2; states get notice filings, consents and fees, nothing for listed, and Form D within 15 days for Rule 506.
- Coordination is effective with the SEC after 10 days on file and 2 full business days for price data; filing is for seasoned issuers after 5 business days; qualification is for any security and is effective on the Administrator's order.
Exam shortcut
Run every stem through one order: security, then offer or sale in this state, then covered, exempt security, exempt transaction, and only then registration. Next, read the signal words: "listed" means no state filing, and "Rule 506" means Form D within 15 days. For ten-offeree questions, count offers, drop institutions and hunt for any commission.
The full lesson (about 4,898 words, 33 min read) adds 2 worked examples, all 6 common mistakes, a self-check, free in the app.
Learning objectives
- D34
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