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← Series 63: Regulation of Securities & Issuers
Series 63 practice questionhardPreorganization Subscription—Multiple States

A promoter seeks preorganization subscriptions in three states, collecting 8 subscribers in each state (20 total, no payments collected). Which is TRUE under the USA?

  1. AThe exemption is lost in all states because total subscribers exceed 10
  2. BThe exemption applies in each state because no more than 10 subscribers are in any one state✓ Correct answer
  3. CThe exemption applies only if all 20 subscribers are institutions
  4. DThe exemption applies if no payments are collected in any state, regardless of number of subscribers
Explanation

Why B — The exemption applies in each state because no more than 10 subscribers are in any one state

The 10-subscriber limit applies per state, not in aggregate (USA 402(b)(2)), so the exemption is preserved in each state with no more than 10 subscribers. The other options confuse the state-by-state application.

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