Series 63 practice questionmediumPromissory Notes and Short-Term Debt
A bank issues a 6-month promissory note to raise short-term funds. Under Section 401(l) of the USA, is this note a security?
- AYes; it is a note/security, although bank-issued status may exempt it from registration✓ Correct answer
- BNo, because short-term notes under 9 months issued by banks are excluded
- CYes, if the note is convertible into equity
- DNo, unless the note is publicly traded
Explanation
Why A — Yes; it is a note/security, although bank-issued status may exempt it from registration
A promissory note is included in the USA definition of a security. Because this note is issued by a bank organized and supervised under federal or state banking law, it is generally an exempt security for state-registration purposes; that exemption does not make it “not a security.”
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