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

    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.
  2. 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.
  3. 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.
  4. 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
  5. 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.
  6. 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.
  7. Professionals

    Understanding Series 63

    Series 63 is a securities license that entitles the holder to sell securities in a particular state.
  8. Professionals

    How To Answer Option Questions On The Series 7 Exam

    Learn how to answer option questions on the Series 7 exam. Pass your Series 7 exam with the help of these tips.
  9. Insurance

    Municipal Bond Tips For The Series 7 Exam

    Learn to distinguish between general obligation and revenue bonds to ace this test.
  10. Retirement

    6 Proven Tips For Series 6 Success

    These techniques can help you pass this test without the added stress.
  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 ...
  1. Is a financial advisor required to have a degree?

    Financial advisors are not required to have university degrees. However, they are required to pass certain exams administered ... Read Full Answer >>
  2. If I have only a limited amount of time to study for the Series 6, what should I ...

    The Series 6 Investment Company and Variable Contracts Products Representative Qualification Examination is administered ... Read Full Answer >>
  3. What role does the 'chip cycle' play in the electronics sector?

    There are several highly acclaimed private Series 6 Exam courses in the United States. Many can be completed online. Popular ... Read Full Answer >>
  4. What does passing the Series 6 enable me to do?

    The Series 6, or the Investment Company Products/Variable Contracts Limited Representative, exam is administered by the Financial ... Read Full Answer >>
  5. What are the differences between the Series 6 exam and the Series 7 exam?

    The Financial Industry Regulatory Authority (FINRA) offers a variety of licenses that must be obtained before conducting ... Read Full 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 Full Answer >>
Hot Definitions
  1. Real Estate Investment Trust - REIT

    A REIT is a type of security that invests in real estate through property or mortgages and often trades on major exchanges ...
  2. Section 1231 Property

    A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
  3. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
  4. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  5. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  6. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!