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Because of the high quality of the collateral, transactions in mortgage-backed securities are exempt so long as the entire mortgage or deed of trust is sold as a unit in the transaction.


Should a person pledge securities as collateral for a loan, the pledge does not constitute a sale. Additionally, should the borrower default on the loan, the person who now has ownership of the securities by way of default may sell those securities without being required to register the securities to recoup the losses.


Transactions with existing holders of the following are exempt:

• Convertible securities.

• Nontransferable warrants.

• Transferable warrants exercisable within 90 days.

These transactions with existing securities holders are all exempt provided no commission was paid directly or indirectly for soliciting the security holder.


Certain regulations may require that a corporation receive a minimum level of capital in order to be formed. A preorganization certificate is an agreement to purchase securities prior to the formation of a corporation. The offer or sale of the certificate is exempt if no commission was received for soliciting the sale. The number of subscribers may not exceed 10, and the subscriber may not make any payments.


An agent or a broker dealer may occasionally recommend a security to a client that is not registered in the client's state of residence as long as it is an isolated event. An isolated transaction means one or very few are performed per year per broker dealer. The number of transactions that qualifies as isolated transactions varies from state to state. An isolated nonissuer transaction may also include a transaction between two individuals without the use of a broker dealer. In this type of transaction, the owner of the securities may sell the securities to another interested party directly.


A nonissuer transaction is a transaction of publicly traded securities and is exempt if the issuer meets the following requirements:

• The issuer has securities registered under Section 12 of the Securities Exchange Act of 1934 and has been reporting for at least 180 days;


• The issuer has securities registered under the Investment Company Act of 1940;


• The issuer has filed the information required by the Securities Exchange Act of 1934 with the administrator for at least 180 days prior to the transaction.

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