Series 66

AAA

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
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