Series 63 practice questionmediumExempt Securities — Investment Company Securities
In a state-law practice set, a candidate reviews the following scenario. Treat the facts as a straight Series 63 application question. Securities issued by an open-end investment company (mutual fund) registered under the Investment Company Act of 1940 are:
- AExempt from both state and federal registration
- BConsidered federal covered securities and exempt from state registration, though subject to notice filing and fee requirements✓ Correct answer
- CRequired to register by coordination in every state
- DExempt from all antifraud provisions
Explanation
Why B — Considered federal covered securities and exempt from state registration, though subject to notice filing and fee requirements
Under NSMIA and USA Section 102(6), securities issued by investment companies registered under the Investment Company Act of 1940 are classified as federal covered securities. While they are exempt from state registration, states may require notice filings and collect fees. Importantly, states retain antifraud authority. This variant keeps the same legal rule but shifts the setup so recall has to stay flexible.
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