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Series 63 practice questionmediumFederal/State Coordination — Notice Filing

In a state-administrator case study, the scenario starts here. Assume the administrator is testing the cleanest state-law answer. If a federal covered security's notice filing in a state expires and is not renewed, what is the consequence?

  1. AThe security becomes permanently exempt from all state requirements
  2. BThe issuer may be prohibited from offering or selling the security in that state until the notice filing is renewed✓ Correct answer
  3. CThe SEC will revoke the federal registration of the security
  4. DThe security automatically becomes subject to full state registration by qualification
Explanation

Why B — The issuer may be prohibited from offering or selling the security in that state until the notice filing is renewed

Under USA Section 302 and NSMIA, while states cannot require full registration of federal covered securities, they can require notice filings. If a notice filing expires and is not renewed, the state may prohibit the issuer from offering or selling the security in that state until the notice filing is brought current. The state's enforcement is limited to this administrative requirement and does not affect the security's federal covered status. This version tests the same concept with a different fact pattern wrapper.

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