NASAA Series 63Regulation of Securities and IssuersEasy
A broker-dealer sells a block of securities directly to another registered broker-dealer, acting as principal in the trade. Under the Uniform Securities Act, this transaction is:
- AExempt only if approved in advance by the Administrator
- BExempt, because it is a transaction between broker-dealers
- CNot exempt, because both parties must be agents, not principals
- DNot exempt, because dealer-to-dealer trades require registration by qualification
Show answer & explanationAnswer & explanation
Correct answer: B. Exempt, because it is a transaction between broker-dealers
Transactions between broker-dealers (dealer-to-dealer transactions) are exempt transactions under the Uniform Securities Act because both parties are presumed to be sophisticated market professionals who do not need the protection of registration.
Why the other options are wrong
- A. Incorrect; no prior Administrator approval is required.
- C. Incorrect; the exemption applies regardless of principal or agent capacity.
- D. Incorrect; exempt transactions require no registration process at all.
Dealer-to-Dealer Exemption
Sales between broker-dealers are exempt transactions because the parties are professionals not needing registration protections.
- Applies whether acting as principal or agent
- One of several institutional/professional exemptions
- Does not exempt fraud liability
Memory trick: Pros trading with pros need no protection.