A training manager asks you to analyze the following USA issue. The key is the registration, exemption, or ethical rule doing the real work. A group of entrepreneurs collects preorganization subscriptions from 15 individuals for a new corporation. No payment has been collected, but a sales agent was paid a commission for finding subscribers. Is this offering exempt from state registration?

Why C — No, because commissions were paid for soliciting subscribers, violating a condition of the exemption

Under USA Section 402(b), the preorganization certificate exemption requires that no commission or remuneration be paid for soliciting subscribers. Even though no payment was collected from subscribers, paying a commission to a sales agent disqualifies the offering from this exemption. Both the payment of commissions and exceeding the subscriber limit would be violations here. The exam trick is the framing, not the underlying Uniform Securities Act rule.