Securities Registration, Exempt Securities, and Exempt Transactions


In this section, we will review the various types of security registration, along with when the security is required to be registered. All securities that are sold to state residents must either be:

• Duly registered; or

• Exempt from registration; or

• Sold through an exemption transaction.


Exempt securities are exempt from the registration requirements of the Securities Act of 1933. Exempt securities are not exempt from the antifraud provisions of the Uniform Securities Act (USA). Exempt securities are:

• Issued by exempt issuers, such as governments.

• Short-term debt instruments with less than 270 days to maturity.


Nonexempt securities become federally registered by submitting a registration statement to the Securities and Exchange Commission (SEC). Nonexempt securities must also register in the states in which the securities will be sold. The three methods of registering securities in a state are:

1. Coordination

2. Notice filing

3. Qualification

It is important to understand how the three types of securities registration differ and under what circumstances the different registration methods are used.


When a company first sells stock to the public during an initial public offering (IPO), the company must file a registration statement with the SEC. The company must also file documents with the state securities administrator in the states where the issue will be sold. Most IPOs will register with the state securities administrator at the same time that they register with the SEC. This process of simultaneous registration is known as coordination. The following must be submitted to the administrator:

• Copies of the prospectus.

• Any amendments to the prospectus.

• The amount of the securities to be offered within the state.

• A list of other states where the securities will be offered.

• Consent to service of process.

• Other information as required by the state securities administrator, including the corporate bylaws, articles of incorporation, specimen of the security, and indenture of any kind.

If an amendment has been made to the federal registration, it must also be made to the state registration. A security's state registration will become effective at the time the federal registration becomes effective as long as no stop order has been issued and the documents have been on file with the state for the minimum number of days (usually 10-20 days). It is important to note that a state registration may not become effective prior to the security's federal registration becoming effective.

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