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← Series 63: Regulation of Securities & Issuers
Series 63 practice questionhardExempt Securities — Federal Covered Securities

A financial adviser tells a client that because a security is exempt from state registration, it is also exempt from all state securities laws, including antifraud provisions. This statement is:

  1. ACorrect, because exempt securities are not subject to any state regulation
  2. BIncorrect, because exempt securities are still subject to the state's antifraud provisions✓ Correct answer
  3. CCorrect, because the SEC has sole jurisdiction over exempt securities
  4. DCorrect, but only for federal covered securities
Explanation

Why B — Incorrect, because exempt securities are still subject to the state's antifraud provisions

Under USA Section 101, even though certain securities are exempt from state registration requirements, they remain subject to the antifraud provisions of the Uniform Securities Act. No security or transaction is ever exempt from antifraud enforcement. The state Administrator always retains authority to take action against fraud, regardless of exemption status.

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