Series 63 practice questionmediumExempt Transactions — Existing Security Holders
A corporation offers additional shares exclusively to its existing shareholders as part of a stock dividend. Is this transaction exempt from state registration?
- AYes, transactions with existing security holders where no commission is paid are exempt from registration✓ Correct answer
- BNo, all new share issuances must be registered
- CNo, unless the shares are also registered with the SEC
- DYes, but only if fewer than 10 shareholders participate
Explanation
Why A — Yes, transactions with existing security holders where no commission is paid are exempt from registration
Under USA Section 402(b), transactions by an issuer with its existing security holders are exempt from registration, including stock dividends and other distributions, provided no commission or remuneration is paid for soliciting the existing shareholders. This exemption recognizes that existing holders already have a relationship with the issuer.
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