Series 63 practice questionhardHard: Unregistered Investment Company
A hedge fund offers securities to accredited investors in several states under Rule 506 of Regulation D. Are the offered securities federal covered securities?
- AYes, all investment company offerings are federal covered
- BNo, only registered investment companies' securities are federal covered
- CYes, if the offering is made under Rule 506✓ Correct answer
- DNo, hedge funds are always exempt from all state oversight
Explanation
Why C — Yes, if the offering is made under Rule 506
Securities offered under Rule 506 are federal covered securities. States may require the permitted Rule 506 notice filing and fee and retain antifraud authority, but the federal-covered status comes from Rule 506—not merely from the purchasers being accredited or the issuer being a hedge fund.
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