As the Series 7 exam will expect you to know, certain securities are exempt from registration because of either the type of security or the type of transaction involved. You may find that securities that are exempt because of who’s issuing them are a bit easier to recognize. You’ll probably have to spend more time on
the securities that are exempt from registration because of the type of transaction. Certain securities are exempt from the registration requirements under the Securities Act of 1933. Either these securities come from issuers that have a high level of creditworthiness, or another government regulatory agency has some sort of jurisdiction over the issuer of the securities. These types of securities include Securities issued by the U.S.
government or federal agencies Municipal bonds (local government bonds) Securities issued by banks, savings institutions, and credit unions Public utility stocks or bonds Securities issued by religious, educational, or nonprofit organizations Notes, bills of exchange, bankers’ acceptances, and commercial paper with an initial maturity of 270 days or less Insurance policies and fixed annuities Fixed annuities are exempt from SEC registration because the issuing insurance company guarantees the payout. However, variable annuities require registration because the payout varies depending on the performance of the securities held in the separate account. Exempt transactionsSome securities that corporations offer may be exempt from the full registration requirements of the Securities Act of 1933 due to the nature of the sale. The following list shows you these exemptions:
The following example tests your ability to answer restricted-stock questions. John Bullini is a control person who purchased shares of restricted stock and wants to sell under Rule 144. John has fully paid for the shares and has held them for over one year. There are 1,500,000 shares outstanding. Form 144 is filed on Monday, May 28, and the weekly trading volume for the restricted stock is as follows:
What is the maximum number of shares John can sell with this filing? (A) 15,000 (B) 15,750 (C) 16,200 (D) 16,250 The right answer is Choice (B). The test writers often try to trick you on the Series 7 exam by giving you at least one week more than you need to answer the question. Because John has held his restricted stock for over a year, he can sell 1 percent of the outstanding shares or the average weekly trading volume for the previous four weeks, whichever is greater: In this case, the previous four weeks are the top four in the list, but be careful; the examiners are just as likely to use the bottom four to give the table a different look. Figure out 1 percent of the outstanding shares by multiplying the outstanding shares by 1 percent. You come up with 15,000 shares. The other possible answer is the average weekly trading volume for the previous four weeks. Add the trading volume for the previous four weeks and divide by 4 to get an answer of 15,750 shares. Because you’re looking for the greater number, the answer is Choice (B). Even securities exempt from registration are subject to antifraud rules. All securities are subject to antifraud provisions of the Securities Act of 1933, which requires issuers to provide accurate information regarding any securities offered to the public. About This ArticleThis article can be found in the category:
What is an example of an exempt security?Exempt Security - Common types of exempt securities are government securities, bank securities, high-quality debt instruments, non-profit securities, and insurance contracts.
What are the exempt transactions?An exempt transaction is a type of securities transaction where a business does not need to file registrations with any regulatory bodies, provided the number of securities involved is relatively minor compared to the scope of the issuer's operations and that no new securities are being issued.
Which of the following is an example of a transaction that is exempt from the registration requirements of the 1933 Act?Which of the following is an example of a transaction exemption from the registration requirements of the 1933 Act? Securities issued by for-profit corporations and offered solely to intrastate investors.
Which of the following is an exempt transaction under the 1934 Act?Exempt transactions include isolated nonissuer transaction; transactions between an issuer and an underwriter; transactions by an executor, Administrator, sheriff, marshal, trustee in bankruptcy, guardian, or conservator; any sale or offer to a bank, savings institution, investment company, or other financial ...
|