NASAA Series 63Regulation of Securities and IssuersHard
A corporation issues short-term promissory notes with a maturity of 8 months, rated in one of the three highest categories by a nationally recognized rating agency, and sold in denominations of $50,000. Under the Uniform Securities Act, these notes are:
- AExempt only if sold exclusively to institutional investors
- BNon-exempt securities requiring full registration
- CExempt securities because of their short maturity and high credit rating
- DExempt transactions but non-exempt securities
Show answer & explanationAnswer & explanation
Correct answer: C. Exempt securities because of their short maturity and high credit rating
Commercial paper and similar short-term promissory notes with a maturity of nine months or less, rated in one of the three highest rating categories, and issued in minimum denominations of $50,000, qualify as exempt securities under the Uniform Securities Act.
Why the other options are wrong
- A. The exemption is based on maturity, rating, and denomination, not solely on investor type.
- B. These notes fit the specific statutory exemption and do not require registration.
- D. The security itself is exempt, not merely the transaction.
Exempt Commercial Paper
Short-term promissory notes maturing in 9 months or less, rated in one of the top three categories, and sold in denominations of $50,000 or more, are exempt securities.
- Maturity of 9 months or less
- Top three rating categories required
- Minimum denomination of $50,000
Memory trick: Nine months, top-three rated, fifty-thousand minimum = exempt paper