In a state-administrator case study, the scenario starts here. The key is the registration, exemption, or ethical rule doing the real work. If a federal covered security's notice filing in a state expires and is not renewed, what is the consequence?

AThe security becomes permanently exempt from all state requirements
BThe issuer may be prohibited from offering or selling the security in that state until the notice filing is renewed✓ Correct answer
CThe SEC will revoke the federal registration of the security
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. The governing USA principle is unchanged even though the framing is different.

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