Securities Registration Methods
Securities must be registered at the state level unless an exemption applies. The Uniform Securities Act provides three primary methods for state registration.
Registration by Coordination
Registration by coordination is used when a security is being registered with both the SEC and one or more states simultaneously.
When Used
| Situation | Details |
|---|---|
| SEC Registration | Security is being registered under the Securities Act of 1933 |
| Multi-State Offerings | Issuer selling in multiple states |
| IPOs | Initial public offerings |
| Follow-On Offerings | Additional offerings by public companies |
Requirements
| Filing | Details |
|---|---|
| SEC Documents | Copy of SEC registration statement |
| Amendments | All amendments filed with SEC |
| Additional Information | State-specific requirements |
| Consent to Service | Irrevocable consent to service of process |
| Filing Fee | State-required fee |
Effective Date
| Condition | Effective Date |
|---|---|
| Standard | Simultaneous with SEC registration |
| Prerequisites | Must be no stop order pending |
| Price Statement | Must file statement of offering price |
| State Notification | Some states require advance notice |
Advantages
| Benefit | Description |
|---|---|
| Streamlined Process | Uses federal documents |
| Coordinated Timing | Effective when SEC approves |
| Efficiency | One set of documents for multiple jurisdictions |
Registration by Qualification
Registration by qualification is used for securities NOT registered with the SEC. This is the most detailed state registration method.
When Used
| Situation | Details |
|---|---|
| Intrastate Offerings | Securities sold only within one state |
| Non-SEC Offerings | Securities not requiring SEC registration |
| Any Security | May be used even if SEC registration available |
Requirements
| Filing | Details |
|---|---|
| Complete Registration Statement | Detailed disclosure document |
| Financial Statements | Audited financials typically required |
| Offering Documents | Prospectus, subscription agreements |
| Consent to Service | Irrevocable consent |
| Escrow (if required) | Administrator may require impound of proceeds |
| Surety Bond | May be required |
Effective Date
| Condition | Details |
|---|---|
| Administrator Sets Date | No automatic effective date |
| Discretionary | Administrator decides when to approve |
| Additional Requirements | May require amendments or conditions |
Escrow Requirements
The administrator may require funds be held in escrow until:
| Condition | Purpose |
|---|---|
| Minimum Sales | Specified amount of securities sold |
| Specified Period | Time has elapsed |
| Conditions Met | Other conditions satisfied |
Registration by Notice Filing (Federal Covered)
Notice filing is a simplified process for federal covered securities established by the National Securities Markets Improvement Act of 1996 (NSMIA).
What Are Federal Covered Securities?
| Category | Examples |
|---|---|
| Exchange-Listed | NYSE, NASDAQ, NYSE American listed securities |
| Investment Companies | Registered mutual funds, ETFs |
| Qualified Purchasers | Securities sold only to qualified purchasers |
| Regulation D Rule 506 | Private placement offerings |
| Regulation A Tier 2 | Up to $75 million offerings |
| Regulation CF | Crowdfunding offerings |
Notice Filing Requirements
| Requirement | Details |
|---|---|
| Notice | Copy of SEC filing (e.g., Form D) |
| Fee | State notice filing fee |
| Timing | Within specified period (varies by state) |
| No Full Registration | State cannot require full registration |
State Authority Retained
| Authority | Details |
|---|---|
| Cannot Require Registration | NSMIA preempts state registration |
| Can Require Notice and Fee | States may collect fees |
| Antifraud Jurisdiction | Full authority over fraud |
| Enforcement | Can investigate and take action |
On the Exam: Federal covered securities are exempt from state registration but may still require notice filing and remain subject to state antifraud provisions.
Comparison of Registration Methods
| Feature | Coordination | Qualification | Notice Filing |
|---|---|---|---|
| SEC Involvement | Yes | No | Based on federal exemption |
| Complexity | Moderate | High | Low |
| Effective Date | With SEC | Administrator sets | Upon filing |
| Primary Use | IPOs, public offerings | Intrastate, private | Federal covered |
| State Review | Limited | Extensive | Minimal |
Duration and Renewal
| Requirement | Details |
|---|---|
| Standard Duration | 1 year from effective date |
| Calendar Year | Some states: expires December 31 |
| Renewal Required | Annual renewal filing and fee |
| Failure to Renew | Registration lapses |
Stop Orders
The administrator can issue a stop order to:
| Action | Effect |
|---|---|
| Deny Registration | Prevent effectiveness |
| Suspend Registration | Temporarily halt sales |
| Revoke Registration | Permanently cancel |
Grounds for Stop Order
| Ground | Example |
|---|---|
| Incomplete Filing | Missing required information |
| Misleading Statements | False or misleading material |
| Fraud | Fraudulent conduct |
| Excessive Fees | Unreasonable commissions |
| Unfair Terms | Offering terms unfair to investors |
Procedural Requirements
| Requirement | Details |
|---|---|
| Notice | Administrator must provide notice |
| Opportunity for Hearing | Must allow hearing within 15 days of request |
| Written Order | Order must be in writing |
| Findings | Must include findings of fact |
Key Takeaways
- Coordination: used when registering with SEC simultaneously
- Qualification: most detailed, used for intrastate/non-SEC offerings
- Notice filing: simplified process for federal covered securities
- NSMIA preempts state registration of federal covered securities
- States retain antifraud authority even over federal covered securities
- Registration typically lasts 1 year and requires annual renewal
Test Your Knowledge
Registration by coordination is used when:
A
B
C
D
Test Your Knowledge
Federal covered securities:
A
B
C
D
Test Your Knowledge
Registration by qualification:
A
B
C
D
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16.3 Exempt Securities
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