On a final review set, the question is presented in this context. The key is the registration, exemption, or ethical rule doing the real work. A corporation offers its existing shareholders the right to purchase additional shares at a discount through a rights offering. The corporation pays its broker-dealer a commission to solicit shareholders. Does this transaction qualify for the existing security holder exemption?

Why C — No, because paying a commission for solicitation disqualifies the transaction from this exemption

Under USA Section 402(b), the existing security holder exemption applies only when no commission or other remuneration is paid directly or indirectly for soliciting the security holders. By paying its broker-dealer a commission to solicit shareholders, the corporation has violated a key condition of the exemption, and the offering must be registered. This variant keeps the same legal rule but shifts the setup so recall has to stay flexible.