On a timed state-securities quiz, the scenario below appears. The exam wants the best state-securities answer, not a practical business answer. A financial adviser tells a client that because a security is exempt from state registration, it is also exempt from all state securities laws, including antifraud provisions. This statement is:

Why B — Incorrect, because exempt securities are still subject to the state's antifraud provisions

Under USA Section 101, even though certain securities are exempt from state registration requirements, they remain subject to the antifraud provisions of the Uniform Securities Act. No security or transaction is ever exempt from antifraud enforcement. The state Administrator always retains authority to take action against fraud, regardless of exemption status. The governing USA principle is unchanged even though the framing is different.