Regulation of Securities - Exempt Securities

First, it is important to make this clear: there are two different types of exemptions, according to the USA. They aresecurities exempt from registration and transactions exempt from registration. This may get a little confusing, as there can be both securities and transactions that are exempt, or either can be exempt individually.

A security that is non-exempt must be registered. Furthermore, all transactions that are exempt are generally known to be exempt before the transaction ever takes place.

  • Securities
    Section 201 of the USA lists nine types of exempt securities. As a general rule, any security backed by or insured by a government, or government institution, is usually exempt. Though it is important to remember the following nine items, if you retain nothing else, just remember that anything that has some sort of federal or municipal tax-exempt status is probably exempt.

    The following nine items are specified as "exempt" by the USA:

    • Government securities - Any securities that are guaranteed by the U.S. government, a state or "a political subdivision of a state"
       
    • Legitimate foreign governments - Any security issued by a foreign government - with which the U.S. maintains a diplomatic relationship
       
    • Banks and depository institutions - A security that will represent an interest in, or a direct obligation of, or guaranteed by:
      • an international banking institution.
      • a depository institution that is a member of the Federal Reserve system, or organized in relation to the state in question.
      • any other depository institution, unless specified as not exempt by the Administrator.
         
    • Insurance - A security issued/representing (guaranteed by) an insurance company authorized to do business in the state
       
    • Railroads and public utility securities - A security issued, or guaranteed by a railroad, other common carrier, public utility, or other public holding company that is:
      • regulated in respect to the issuance or guarantee, and/or rates, and charged of the security by the United States, a State, Canada, or a Canadian, or
      • a public utility holding company registered under the Public Utility Holding Company Act of 1935.
         
    • Options or warrants - A put or a call option contract; a warrant; a subscription right on or with respect to such securities; or an option or similar derivative security on a security or an index of securities of foreign currencies issued by a clearing agency registered under the Securities Exchange Act of 1934 and listed or designated for trading on a national securities exchange
       
    • Nonprofits - A security issued by a person organized and operated exclusively for religious, educational, benevolent, fraternal, charitable, social, athletic or reformatory purposes, or as a chamber of commerce, and not for profit
       
    • Employee benefit plans - Securities sold to employees of a company in connection to stock, savings or pension plans
       
    • Equipment trust certificates - An equipment trust certificate with respect to equipment leased or conditionally sold to a person - i.e. equipment lease financing through leveraged leases, conditional sales and other devices
Exempt Transactions


Related Articles
  1. Professionals

    The Difference Between Series 63, 65 and 66

    After passing the first core examination, usually the FINRA Series 6 or Series 7, one hurdle remains. That’s the Series 63, 65 or 66.
  2. FA

    The Basics of The Series 79 Exam

    Passing the Series 79 exam is usually necessary for anyone who wants to work in investment banking.
  3. Term

    What is the Series 66?

    The Series 66 exam is one of two tests required to register as both a securities agent and an investment advisor.
  4. Professionals

    Breaking Down Financial Securities Licenses

    Find out which exam you need to begin your career as an investment professional.
  5. Professionals

    Career Advice: Financial Analyst Vs. Investment Banker

    Read an in-depth comparison about working as a Financial Analyst vs. working as an Investment Banker, two highly prestigious business careers.
  6. Professionals

    Who Needs to Take the Series 65?

    Most states require individuals to pass the Series 65 exam in order to act as investment advisors.
  7. Investing Basics

    Brokers and RIAs: One and the Same?

    Brokers and registered investment advisors have some key differences. Here's what you need to know.
  8. Professionals

    Understanding Series 6

    Upon successful completion of the Series 6, an individual will have the qualifications needed to sell open end mutual funds and variable annuities
  9. Professionals

    Top Strategies on How to Become a Stock Broker

    Gunning to be a stock broker and want an edge? Here's some veteran advice.
  10. Trading Systems & Software

    Steps to Starting Up an Independent Broker Dealer

    Launching your own broker-dealer is a lot of work, but the potential payoff is great, both personally and financially.
RELATED TERMS
  1. Series 6

    A securities license entitling the holder to register as a limited ...
  2. Series 79

    A examination to ensure a candidate is qualified to become a ...
  3. Research Analyst

    A person who prepares investigative reports on equity securities. ...
  4. Series 34

    An exam required for individuals seeking to engage in off-exchange ...
  5. Financial Advisor

    One who provides financial advice or guidance to customers for ...
  6. Series 23

    An exam offered by the Financial Industry Regulatory Authority ...
RELATED FAQS
  1. Is a financial advisor required to have a degree?

    Discover the minimum educational requirements and financial licenses needed to become a financial advisor in the modern corporate ... Read Answer >>
  2. If I have only a limited amount of time to study for the Series 6, what should I ...

    Learn what to focus on when studying for the Series 6 while reviewing important aspects of the exam, including its content ... Read Answer >>
  3. What role does the 'chip cycle' play in the electronics sector?

    Read about some of the best and most popular test prep classes for the Series 6 FINRA securities licensing exam, including ... Read Answer >>
  4. What does passing the Series 6 enable me to do?

    Learn more about the Series 6, what the examination and license are and what the license enables an individual to buy, sell ... Read Answer >>
  5. What are the differences between the Series 6 exam and the Series 7 exam?

    Learn about the regulatory exams needed to become a limited or registered representative and the main differences between ... Read Answer >>
  6. Do I have to successfully complete the Series 7 exam before I can register for the ...

    There are no prerequisites to register for the Series 63 exam. However, once you have registered for the exam, you must schedule ... Read Answer >>
Hot Definitions
  1. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  2. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  3. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  4. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
  5. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
  6. Economies Of Scale

    Economies of scale is the cost advantage that arises with increased output of a product. Economies of scale arise because ...
Trading Center