Series 63 practice questionhardExemptions — Scenario
Global Investments, a Canadian broker-dealer with no U.S. office, effects transactions exclusively with U.S. institutional investors. A high-net-worth individual in State C asks Global to execute a trade. If Global complies, what is the consequence?
- AGlobal may lose its exemption from registration in State C because it transacted with a non-institutional client✓ Correct answer
- BNo consequence, as the individual qualifies as an accredited investor
- CGlobal is protected because the client initiated the transaction
- DGlobal faces no issue because it is a Canadian firm outside U.S. jurisdiction
Explanation
Why A — Global may lose its exemption from registration in State C because it transacted with a non-institutional client
Under USA Section 401(c), a broker-dealer with no office in a state is exempt only if it deals exclusively with institutional investors, broker-dealers, or issuers in that state. Effecting a transaction with a high-net-worth individual (who is not an institutional investor) would cause Global to lose the exemption and require registration in State C.
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