NASAA Series 63Regulation of Securities and IssuersMedium
An agent's client, without any solicitation from the agent, calls and requests that the agent purchase shares of a nonreporting company that is not registered in the state. This is most likely an example of:
- AAn unsolicited (nonissuer) transaction exemption
- BA private placement exemption
- CAn isolated nonissuer transaction
- DAn exempt security
Show answer & explanationAnswer & explanation
Correct answer: A. An unsolicited (nonissuer) transaction exemption
When a client initiates an unsolicited order for a nonissuer transaction, the transaction is exempt from the securities registration requirements, even though the security itself is not registered. This exemption does not exempt the agent or broker-dealer from their own registration requirements.
Why the other options are wrong
- B. Private placement exemptions apply to issuer sales to a limited number of purchasers, not secondary market unsolicited orders.
- C. Isolated nonissuer transactions apply to infrequent sales by an owner, not client-initiated unsolicited orders.
- D. The security itself is not exempt; it is the transaction that is exempt.
Unsolicited Order Exemption
A transaction exemption that applies when a customer, without solicitation, requests execution of an order for an unregistered nonissuer transaction.
- Exempts the transaction, not the security
- Agent and broker-dealer must still be properly registered
- Does not apply if the agent recommended or solicited the trade
Memory trick: Client calls first = unsolicited exemption applies