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← Series 63: Regulation of Securities & Issuers
Series 63 practice questionhardTricky—state enforcement powers

A junior banker at William Blair suspects a fraudulent omission in a Reg D (Rule 506) offering in State S. What is the BEST course of action for the State S Administrator?

  1. AInvestigate and, if appropriate, enforce state antifraud statutes.✓ Correct answer
  2. BRequire the issuer to re-file the offering for state registration.
  3. CImpose a ban on all future Rule 506 offerings by the issuer.
  4. DImpose additional disclosure requirements before further sales.
Explanation

Why A — Investigate and, if appropriate, enforce state antifraud statutes.

NSMIA preempts state registration/disclosure requirements for Rule 506 deals, but NOT state antifraud enforcement (USA 203A). Administrator can't require re-filing, ban all offerings, or add disclosure beyond federal rules.

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