Exempt Transactions Flashcards
Isolated Non-Issuer Transactions
would be comparable to a “for sale by owner”. Remember the example the TT guy gave when he sold his sister the mustang and the ford stock
Unsolicited Brokerage Transaction
These are exempt. These are transactions initiated by the client and are UNSOLICITED. These are the most common of all exempt transactions.
The Administrator may require that the customer acknowledge upon a specified form that the sale was unsolicited and that a signed copy of the form be kept by the BD for a specified period.
Underwriter Transactions
These include transactions between issuer and underwriter as well as between underwriters themselves.
Bankruptcy, guardian, or conservator transactions
Transactions by an executor, administrator, marshal, sheriff, trustee in bankruptcy, or other fiduciary are exempt transactions
*A custodian under an UTMA or UGMA are NOT included in this list…only Trustee who is included is one in a bankruptcy case.
Institutional Investor Transactions
Primarily transactions with financial institutions. Includes any offer or sale to a bank, savings institution, trust company, ins company, or investment company as defined in the Investment Company Act of 1940.
Employee benefit plans with assets of AT LEAST 1 million are also included as are transactions with a BD, whether acting for itself or in some fiduciary capacity.
Private Placement, also known as Limited Offering Transactions
Any offering directed at not more than 10 persons(aka offerees) other than institutional investors during the previous 12 consecutive months provided that:
- The seller believes the noninstitutional buyers are purchasing for investment purposes only
- No commission or other remuneration is paid for soliciting non institutional investors
- No general soliciting or advertising is used.
Unlike FINRA the USA does NOT require a written document stating that it’s just for investments.
The Administrator can reduce or increase the amount of investors but 10 is the # to remember and what will be tested on
Preorganization Certificates
Don’t confuse this with Private Placement.
These are limited to 10 SUBSCRIBERS(private placements get offerees) but this is the limit total regardless of institutional or non institutional
no commission or remuneration is paid or given directly or indirectly for soliciting any subscriber.
The purpose of “preorganizaition certificates” is to be able to receive a charter so there may be a publicly advertised offering of preorganization subscriptions
But there can be NO PAYMENT until effective registration is completed.
Transactions with existing security holders
A transaction made under an offer to existing security holders of an issuer (including persons who are holders of convertible securities, rights, or warrants) is exempt as long as no commission or other form of remuneration is paid directly or indirectly for soliciting that security holder
Nonissuer Transactions by pledgees
A nonissuer transaction executed by a bona fide pledgee (the one who received the security as collateral for a loan) as long as it is not for the purpose of evading the act…
An example would be someone who pledged stock as collateral for a loan and defaulted on the loan…the lender could sell the stock to recoup the loss and under USA that sale would be an exempt transaction
Unit Secured Transactions
Transactions in a bond backed by a real mortgage or deed of trust provided that the entire mortgage or deed of trust is sold as a unit
Control Transactions
Mergers, consolidations, or reorganization transactions to which the issuer and the other person or it’s parent or subsidiary are parties
Rescission offers
Offers made to rescind an improper transaction
ALERT! Don’t confuse the term “accredited investor” with INSTITUTIONAL INVESTOR
Accredited Investor (remember reg d and b rob) is a term that only applies to federal law, NOT the USA and probably will never be the correct answer to a USA question
An Institutional Investor is an investor that manages large amounts of money such as a mutual fund, an insurance company, a bank or a pension fund
Administrators Authority on Exempt Transactions
The Administrator may, by rule or order, deny or revoke the registration of only 2 securities:
- Church or non profit
- Investment contracts in connection with employees stock purchase, savings, pension, profit sharing or similar benefit plan.
HOWEVER the Administrator can may deny ANY exempt TRANSACTION. If the person who they deny the exemption wishes to appeal the Administrator must provide an opportunity for a hearing within 15 days of the receipt of a written request
