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← Series 63: Regulation of Securities & Issuers
Series 63 practice questionmediumFederal/State Coordination — State Antifraud Authority

During a registration workshop, the instructor adds this setup first. Treat the facts as a straight Series 63 application question. A state Administrator discovers that an issuer of a federal covered security has been making materially false statements to investors in the state. Can the Administrator take action?

  1. ANo, because the security is federal covered and the state has no jurisdiction
  2. BYes, but only with prior SEC approval
  3. CYes, because the state retains antifraud authority over all securities, including federal covered securities
  4. DNo, only the SEC can take action against federal covered securities✓ Correct answer
Explanation

Why D — No, only the SEC can take action against federal covered securities

Under NSMIA and USA Section 101, states retain full antifraud authority over all securities, including federal covered securities. While NSMIA preempts state registration requirements for certain securities, it explicitly preserves the states' power to investigate and bring enforcement actions for fraud and other violations of state antifraud provisions. State-law analysis leads to the same conclusion despite the alternate scenario.

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