On a timed state-securities quiz, the scenario below appears. The key is the registration, exemption, or ethical rule doing the real work. Offers and sales of preorganization certificates or subscriptions are exempt from state registration provided that:

Why D — No commission or other remuneration is paid for soliciting subscribers, the number of subscribers does not exceed a specified limit, and no payment is made by any subscriber

Under USA Section 402(b), preorganization certificates or subscriptions are exempt from registration if no commission or remuneration is paid for soliciting subscribers, the number of subscribers is limited (typically no more than 10), and no payment is made by any subscriber. These restrictions ensure the exemption is not abused for large-scale capital raises. This version tests the same concept with a different fact pattern wrapper.