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← Series 63: Regulation of Securities & Issuers
Series 63 practice questionhardFederal/State Coordination — Notice Filing

On a final review set, the question is presented in this context. Assume the administrator is testing the cleanest state-law answer. 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?

  1. AYes, because Regulation D offerings are subject to state registration
  2. BNo, because Rule 506 offerings are federal covered securities and states can only require notice filings, not full registration✓ Correct answer
  3. CYes, because private placements are never exempt from state registration
  4. 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. This variant keeps the same legal rule but shifts the setup so recall has to stay flexible.

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