On a final review set, the question is presented in this context. Assume all filings and notices are evaluated under the USA. An issuer conducts a private placement under SEC Rule 506(b) of Regulation D. The state Administrator of State X demands that the issuer register the securities by qualification. Is the Administrator's demand valid?

AYes, because Regulation D offerings are subject to state registration
BNo, because Rule 506 offerings are federal covered securities and states can only require notice filings, not full registration✓ Correct answer
CYes, because private placements are never exempt from state registration
DNo, because private placements are exempt from all state securities laws

Explanation

Why B — No, because Rule 506 offerings are federal covered securities and states can only require notice filings, not full registration

Under NSMIA, securities offered under SEC Rule 506 of Regulation D are classified as federal covered securities. States are preempted from requiring registration of these securities. States may only require a notice filing, a consent to service of process, and applicable fees. The Administrator's demand for full qualification registration exceeds the state's authority under NSMIA. The extra setup is just noise; the controlling state-law rule stays the same.

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