Exempt Securities and Transactions Flashcards
What are considered exempt securities
U.S. government and agency securities – Including Treasury bonds, bills, and notes, as well as agency securities, such as GNMA pass-through certificates.
Municipal securities – Included are bonds issued by state and local governments, as well as authorities, such as housing and port authorities.
Securities issued by the Canadian government and its subdivisions – Includes both federal-level and municipal-level Canadian government securities.
Securities issued by recognized foreign governments other than Canada – Does NOT include securities issued by foreign government entities below the national level and the U.S. must have a diplomatic relationship with the foreign government.
Securities issued by banks, savings institutions, savings & loans, or trust companies – Does NOT include
securities issued by bank-holding companies or securities issued by non-U.S. banks.
Securities issued by insurance companies – This includes the securities, stocks, and bonds issued by insurance companies, but does not include securities sold such as variable policies.
Securities issued or guaranteed by a credit union.
Securities issued by regulated public utilities and regulated railroads and other common carriers.
Securities listed on the New York Stock Exchange, NYSE MKT (formerly known as the American Stock Exchange), Chicago (Midwest) Stock Exchange, or Toronto Stock Exchange – Known as the “blue chip exemption.” These are also federal covered securities.
Securities issued by nonprofit organizations – Includes entities organized for religious, educational, benevolent, charitable, fraternal, social, or athletic purposes.
Nonpreferred equities and nonconvertible bonds issued by “world class foreign issuers” – Issuers organized outside the U.S. who have been in business at least 5 years, have at least $3 billion of equity shares outstanding ($1 billion owned by nonaffiliates), and whose equity securities trade on a foreign exchange.
Promissory notes (such as commercial paper), drafts, or bankers’ acceptances maturing in 9 months or less – Exemption applies if the securities are issued in denominations of at least $50,000, and if they are in one of the three highest ratings categories. This is sometimes called the “commercial paper” exemption.
Investment contracts issued in connection with pension and profit-sharing plans – To obtain this exemption, the Administrator must be notified in writing at least 30 days before the inception of the plan.
What is considered an exempt txn?
Isolated non-issuer transactions – A non-issuer transaction is one that does not involve the issuer. While the USA does not define what “isolated” means, more than one or two transactions per year by the same broker-dealer is too many to qualify for this exemption. These usually do not involve broker-dealers or their agents and are usually meant to cover one-on-one transactions between individual investors in the secondary market.
Unsolicited, non-issuer transaction effected by, or through, a broker-dealer – The Administrator may require that the customer acknowledge in writing that the order was unsolicited.
Transactions between an issuer and its underwriters or transactions between underwriters
Transactions by certain fiduciaries – Included in this group are transactions by executors, administrators (of estates), sheriffs, marshals, receivers, trustees in bankruptcy, guardians, and conservators.
Transactions by a bona fide pledgee, if the transaction is not intended to avoid the USA – An example might include a bank selling stock that was pledged as collateral for a loan that is now in default.
Offers or sales to institutional investors – Institutional investors include banks, savings institutions, trust companies, insurance companies, registered investment companies, pension plans, and other financial institutions.
Offers or Sales of preorganization certificates – The conditions for this exemption include no commissions and 10 or fewer subscribers.
Transactions with existing securities holders involving convertible securities or warrants
Offers (but not sales) of securities for which a registration statement has been filed but is not yet effective – This permits prospecting of potential purchasers by obtaining indications of interest during the cooling-off period for a new issue.
Private placements – The USA includes in this category transactions resulting from offers to 10 or fewer persons (other than institutional investors) during any 12-month period. The seller must believe that the purchasers are buying for investment only, there can be no solicitation or advertising used, and there must be no commissions paid, directly or indirectly.
First GO PU! Something’s Not Clean
exempt securities
Federal covered securities and Financial institution securities
GOvernment and municipal issues
Public Utilities
Securities on exchanges
Nonprofit institutions
Commercial paper
FUNTIP
Exempt Txns
Fiduciary txns
Unsolicited txns
Nonissuer txns
Transactions w/ institutional investors
Isolated nonissuer
Privat placement
What are federal covered securities required to register with unless exempt?
the SEC
Who eliminates the need of duplicate regulation and registration?
The National Securities Market Improvement Act (NSMIA)
What are examples of Federal covered securities
-Securities listed or authorized for listing on the New York Stock exchange (NYSE), The NYSE MKT, NASDAQ or any nation securities exchange
-Securities of the same issuer that are equal in seniority or that are senior securities, or rights or warrants to purchase any listed securities
-Securities issued by an investment co that is registered under the Investment company act of 1040, including mutual funds and closed-end funds
-[Securities offered or sold to “qualified purchasers” such as wealthy or sophisticated investors.
-municipal securities of out-of-state issuers
-securities that are private placements under SEC rules (reg D) ]
Last 3 fed covered securities are exempt from registration at both the fed and state levels
Who are considered accredited investors?
Must meet one of the following
-natural persons with individual or joint net worth of 1million (including spousal equivalents)
-An individual with an annual income of 200,000 for the past 2 years or a couple(including spousal equivalents) with joint income of 300,000 that expects that income level to remain.
-An individual holding a series 7, series 65, or a series 82
-An employee of private funds if deemed knowledgeable (officers, directors. gen partners. advisory board members and employees that participate in the investment activities)
-Investment advisers (federal, state. and exempt reporting)
-Rural business investment Co. (RBICs)
-Any bank, investment Co, and insurance Co, regardless of assets
-Any entity with assets in excess of $5 million including limited liability companies, family offices and their clients, non-profit institutions (501(c)(3) trusts), partnerships, ERISA qualified retirement plans, and corporations with assets over $5 million
An officer or director of the issuer
What is a spousal equivalent?
are couples or partners that are not married, but have essentially the same relationship as a married couple.
What does the state exemption for private placement mean?
The state exemption for private placement simply allows for an offering that doesn’t involve commissions and is made to a maximum of 10 investors.
