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Series 63: Regulation of Securities & Issuers
Series 63 practice questionmediumEdge case: pre-organization certificate

Which statement about a preorganization certificate or subscription is correct under the USA?

  1. AIt is a security, although a transaction involving it may be exempt if the statutory conditions are met✓ Correct answer
  2. BIt is not a security until it is converted into stock
  3. CIt is not a security when offered to 10 or fewer persons
  4. DIt is not a security when sold by a licensed broker-dealer
Explanation

Why AIt is a security, although a transaction involving it may be exempt if the statutory conditions are met

A preorganization certificate or subscription is expressly included in the USA definition of a security. A qualifying preorganization transaction may be exempt from registration, but transaction exemption does not change the instrument’s status as a security.

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