Regulation of Securities - Registration by Qualification

Registration by qualification pertains to all other offerings (that are not federally exempt) that are made within a state. Examples of such include offerings that are intrastate and/or are SEC exempt, based on their smaller size.

The registration period is usually one year, and all persons registering a security must pay the applicable fee.

In the resources portion of the text, you will find a link for a sample registration by qualification application for the state of Utah. Utah was chosen randomly and does not constitute what you will see in all states. However, on the front page of the application website, the site mentions:

"Any security may be registered by qualification. Securities should be registered by qualification when no other method is available."

While this point is not specifically highlighted in the USA, it is important to recognize. Registration by qualification is generally the final method of registration if a security cannot be registered another way.

Qualification entails submitting the following information to the Administrator:

  • With respect to the issuer and any significant subsidiary:
    • The issuer's name, address and form of organization
    • The State or foreign jurisdiction and date of its organization
    • The general character and location of its business
    • A description of its physical properties and equipment
    • A statement of the general competitive conditions in the industry or business in which it is or will be engaged
  • With respect to each director and officer of the issuer, and other person having a similar status or performing similar functions:
    • The person's name, address and principal occupation for the previous five years
    • The amount of securities of the issuer held by the person as of the 30th day before the filing of the registration statement
    • The amount of the securities covered by the registration statement to which the person has indicated an intention to subscribe
    • A description of any material interest of the person in any material transaction with the issuer or a significant subsidiary effected within the previous three years or proposed to be effected
    • The aggregate sum of the remuneration paid to those persons during the previous 12 months and estimated to be paid during the next 12 months, directly or indirectly, by the issuer and all predecessors, parents, subsidiaries and affiliates of the issuer.
    • All above information for a person owning on record or owning beneficially, if known, 10% or more of the outstanding shares of any class of equity security of the issuer
    • With respect to a promoter, if the issuer was organized within the previous three years, all information listed in the first five bullet points above and any amount paid to the promoter within that period, or intended to be paid to the promoter, and the consideration for the payment

Generally speaking, an issuer must provide the following:

  • Basic information: name, address, type of business and description
  • Records of officers, directors and owners with a stake of 10% (or more)
  • Description of issuer's long-term debt and capitalization
  • Type and amount of securities to be offered
  • Any/all stock options to be created in regards to the offering
  • Estimated proceeds
  • Copy of all red herrings, investment circulars or pamphlets for the offering
  • Sample copy of the security
  • Audited balance sheet of the issuer as of a date within four months before the filing of the registration statement
  • An income statement and statement of cash flows for three years prior to the balance sheet
  • A signed or confirmed copy of an opinion of counsel concerning the legality of the security being registered
Exempt Securities
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. Bar Chart

    A style of chart used by some technical analysts, on which, as illustrated below, the top of the vertical line indicates ...
  2. Bullish Engulfing Pattern

    A chart pattern that forms when a small black candlestick is followed by a large white candlestick that completely eclipses ...
  3. Cyber Monday

    An expression used in online retailing to describe the Monday following U.S. Thanksgiving weekend. Cyber Monday is generally ...
  4. Take A Bath

    A slang term referring to the situation of an investor who has experienced a large loss from an investment or speculative ...
  5. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
Trading Center