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← Series 63: Regulation of Securities & Issuers
Series 63 practice questionmediumExempt Transactions — Unsolicited Brokerage Transactions

In a state-administrator case study, the scenario starts here. Read it as a Uniform Securities Act issue rather than a federal-law issue. A registered representative receives a call from a client who asks to purchase 500 shares of a thinly traded OTC stock that the representative has never mentioned. The stock is not registered in the state. Can the representative execute the trade?

  1. ANo, because OTC stocks are never eligible for transaction exemptions✓ Correct answer
  2. BNo, because the stock is not registered in the state
  3. CYes, because this qualifies as an unsolicited brokerage transaction, which is exempt from registration
  4. DYes, but only if the representative first registers the security by qualification
Explanation

Why A — No, because OTC stocks are never eligible for transaction exemptions

Under USA Section 402(b), unsolicited brokerage transactions are exempt from state registration requirements. Since the customer initiated the transaction without solicitation from the representative, the exemption applies regardless of whether the security is registered in the state. The representative may execute the trade as an unsolicited order. State-law analysis leads to the same conclusion despite the alternate scenario.

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