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← Series 63: Regulation of Securities & Issuers
Series 63 practice questionhardFederal/State Coordination — Notice Filing

An issuer conducts a private placement under SEC Rule 506(b) of Regulation D. The state Administrator of State X demands that the issuer register the securities by qualification. Is the Administrator's demand valid?

  1. AYes, because Regulation D offerings are subject to state registration
  2. BNo, because Rule 506 offerings are federal covered securities and states can only require notice filings, not full registration✓ Correct answer
  3. CYes, because private placements are never exempt from state registration
  4. DNo, because private placements are exempt from all state securities laws
Explanation

Why B — No, because Rule 506 offerings are federal covered securities and states can only require notice filings, not full registration

Under NSMIA, securities offered under SEC Rule 506 of Regulation D are classified as federal covered securities. States are preempted from requiring registration of these securities. States may only require a notice filing, a consent to service of process, and applicable fees. The Administrator's demand for full qualification registration exceeds the state's authority under NSMIA.

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