Series 66

AAA

Regulation of Securities - Other Definitions

The USA also defines the following terms:

  • A non-issuer transaction or non-issuer distribution is a transaction or distribution that is not directly or indirectly for the benefit of the issuer.
  • The term guaranteed means guaranteed as to payment of all principal and all interest.

Exam Tips and Tricks
The following is a list of additional securities-related information, mostly pertaining to issuers. Much of this will be on the test, so make sure you do not skip this section!

  • Unlawful sale - The USA clearly mentions that it is "unlawful for a person to offer or sell a security" in a state unless:
    • "the security is a federal covered security".
    • "the security, transaction, or offer is exempted from registration".
    • "the security is registered under" the USA.
  • Initial registration - Before an offer to sell a security can be made, a registrant (the issuer, insider or broker-dealer) must file a registration with the state Administrator.
  • Filing fees - Issuers are required to pay filing fees at both initial registration and annual re-registration. Filing fees fluctuate from state to state. If a filing fee is not paid (or an issuer fails to comply with a notice), the Administrator may issue a stop order "suspending the offer and sale of a federal covered security".
  • General filings - The registrant must supply general information regarding the securities to the Administrator, including the following:
    • The states where the securities will be solicited/offered
    • Amount of securities that will be issued
    • Any guidelines/judgments required by the SEC or other administrative or judicial entity
  • Registration records - The USA specifically states that, along with the initial registration statement, offerings must be accompanied by these:
    • A copy of the latest form of prospectus filed under the Securities Act of 1933
    • A copy of the articles of incorporation and bylaws, or their substantial equivalents currently in effect
    • A copy of any agreement with or among underwriters
    • A copy of any indenture or other instrument governing the issuance of the security to be registered
    • Copies of any other information or any other records filed by the issuer under the Securities Act of 1933 requested by the Administrator
  • Effective date - Once an offering is accepted by the Administrator, it is valid for one year after the date of approval (the effective date). Offerings may be renewed the following year, if the entire issue was not sold.
  • Effectiveness of registration statement - The USA states: "If the federal registration statement becomes effective before each of the conditions is satisfied or is waived by the Administrator, the registration statement is automatically effective ..." The conditions are those of registration records, above.
  • Periodic reports - Issuers may be required to file reports "to keep the information or other record in the registration statement reasonably current and to disclose the progress of the offering." The Administrator cannot require the reports to be filed more often than quarterly.
  • Post-effective amendments - A "registration statement may be amended after the effective date" to alter information, or to increase the number of securities to be offered. Of course, on amendment, an issuer may be required to pay a registration fee.
  • Form of subscription - It may be required that an offering "be sold only on a specified form of subscription or sale contract and that a signed or confirmed copy of each contract be filed" with the Administrator.
  • Escrow and impoundment -
    • Escrow may be required if the offering:
      • is issued within the last five years;
      • is "to be issued to a promoter for a consideration substantially less than the public offering price"; or
      • is to be issued "to a person for a consideration other than cash".
    • Impoundment simply means that proceeds from the sale must be put in escrow until "the issuer receives a specified amount from the sale of the security".
  • Offering outstanding - "Unless the Administrator determines otherwise, a registration statement cannot be withdrawn until one year after its effective date if any securities of the same class are outstanding ..."
Registration of Securities
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