Series 63 practice questionhardExempt Transactions — Institutional Buyers
A broker-dealer sells unregistered securities to a pension fund, an insurance company, and three high-net-worth individual investors in the same transaction. Which portion of this transaction is exempt under the institutional buyer exemption?
- AThe entire transaction, because institutional buyers are involved
- BOnly the sales to the pension fund and insurance company; the sales to the individual investors are not exempt under this provision✓ Correct answer
- COnly the sales to the high-net-worth individuals, because they qualify as accredited investors
- DNone of the transaction, because all buyers must be institutional for the exemption to apply
Explanation
Why B — Only the sales to the pension fund and insurance company; the sales to the individual investors are not exempt under this provision
Under USA Section 402(b), the institutional buyer exemption applies to transactions with entities such as pension funds, insurance companies, and other financial institutions. High-net-worth individuals, regardless of wealth, are generally not classified as institutional buyers under this exemption. The sales to the three individuals would need to rely on a different exemption or registration.
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