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The National Securities Market Improvement Act of 1996 withdrew the states' authority to require the registration of investment companies registered under the Investment Company Act of 1940. The states preserved the right to require investment companies to file a notice and pay a fee. When the issuer of a security notice files with the state securities administrator, the following must be submitted:

• Issuer's name and address.

• Type of organization.

• Description of the securities to be offered.

• Copy of the prospectus.

• Copy of documents filed with the SEC.

• Consent to service of process.

• State fee.

Even though the state securities administrator no longer maintains jurisdiction over the registration process of the securities, the administrator still maintains broad investigative powers over any suspected fraudulent sales practices relating to the securities. The administrator may investigate the firms and agents who offer the securities for sale to investors within its state. Notice filing may also be used by other federally covered and federally registered securities that meet the minimum requirements. The administrator may require that an issuer of a federally covered security trading on an exchange to file all information on file with the SEC and to submit a consent to service of process prior to offering any securities to state residents. A security that is federally registered and trading on the OTC Bulletin Board or on the pink sheets (Pink OTC Market) may be federally registered but may not meet the minimum criteria to notice file.


Securities of issuers that do not meet the requirements for registering through notice filing and that are not an IPO must register through qualification.

Securities of issuers that will be sold only in one state through an intrastate offering will also be registered through qualification. Registration through qualification is the most complex method of registration. The issuer must file a statement containing all of the information required by the state securities administrator. It may include:

• Name and address of the issuer.

• Type of organization.

• Nature of the issuer's business.

• Description of industry.

• Description of issuer's assets.

• Biographical information on officers and directors, including name, address, compensation, and number of shares owned.

• Type of securities to be offered.

• Price of securities.

• Underwriter's discount.

• Issuer's capitalization and long-term debt.

• Audited balance sheet dated within four months of filing.

• Income statements for three years prior to date of balance sheet.

• Amount and use of proceeds.

• Copy of prospectus or offering circular.

• Copy of advertising and sales literature.

• Specimen of security to be offered.

• Any other information requested by the administrator.

• Consent to service of process.

A securities registration under qualification becomes effective when the administrator so orders.

The following apply to all types of securities registration:

• Registration is effective for up to one year from effective date or until all securities have been sold, whichever is longer.

• State securities administrators set filing fees.

• The registration statement may be amended after its effective date to increase the size of the offering so long as the price and underwriter's compensation remains unchanged.

• The administrator may not require the issuer to file reports more often than quarterly.

• The administrator may require the issuer to report on the progress of the sale of the securities.

• The person who files the registration statement with the state may be the issuer, a broker dealer, or a large stockholder selling shares as part of the offering.

The following apply to registration though coordination and qualification:

• State securities administrators may require that the proceeds from the offering be held in escrow until a certain amount has been sold.

• The administrator may require that the securities be sold on a specific subscription form.

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