Series 63 practice questionhardExempt Securities — Investment Company Securities
In a remedial practice session, the fact pattern is framed this way. Read it as a Uniform Securities Act issue rather than a federal-law issue. A closed-end investment company that is NOT registered under the Investment Company Act of 1940 offers its shares in a state. How are these shares treated under state securities law?
- AThey are automatically exempt as investment company securities
- BThey are federal covered securities subject to notice filing only
- CThey must be registered with the state because they do not qualify as federal covered securities✓ Correct answer
- DThey are exempt if the company has been operating for at least three years
Explanation
Why C — They must be registered with the state because they do not qualify as federal covered securities
Under NSMIA and USA Section 102(6), only securities issued by investment companies registered under the Investment Company Act of 1940 qualify as federal covered securities. A closed-end fund that is not registered under the 1940 Act does not meet this criterion and therefore must register its securities at the state level unless another exemption applies. The governing USA principle is unchanged even though the framing is different.
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