Series 63 practice questionhardExempt Transactions — Private Placements
An issuer conducts a private placement under the USA limited offering exemption, selling to 8 individuals over a 10-month period. Two months later, the issuer sells to 4 additional individuals. Has the issuer violated the exemption conditions?
- ANo, because each 10-month period is evaluated separately
- BYes, because the total number of offerees in a 12-consecutive-month period likely exceeds the statutory limit✓ Correct answer
- CNo, because the exemption has no numerical limit on purchasers
- DYes, but only if the additional 4 purchasers are not institutional investors
Explanation
Why B — Yes, because the total number of offerees in a 12-consecutive-month period likely exceeds the statutory limit
Under USA Section 402(b), the limited offering exemption counts the number of persons to whom the securities are offered during any 12-consecutive-month period. Since the issuer offered to 8 persons and then 4 more within a rolling 12-month window, the total of 12 likely exceeds the statutory limit (typically 10), potentially invalidating the exemption.
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