Series 63 practice questionhardExempt Securities - Nonprofit with For-Profit Affiliates
A nonprofit hospital creates a for-profit subsidiary that issues bonds to fund a new wing. Under the USA, the subsidiary's bonds are:
- ANot exempt since the issuer is not a nonprofit✓ Correct answer
- BExempt due to association with the nonprofit parent
- CExempt if the bonds are guaranteed by the nonprofit
- DExempt only if the offering is less than $1 million
Explanation
Why A — Not exempt since the issuer is not a nonprofit
The exemption in USA Section 402(a)(5) only applies to securities issued by the nonprofit itself, not its for-profit subsidiaries. Association or guarantee does not qualify the securities.
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