NASAA Series 63Remedies and Administrative ProvisionsMedium
An investor purchased stock in a non-exempt, unregistered offering for $10,000 and later received $500 in dividends. Two years after the purchase, the issuer wants to make a valid rescission offer under the Uniform Securities Act, using the legal rate of interest of 6% simple annual interest. How much must the issuer offer the investor to properly rescind the transaction?
- A$10,700
- B$11,200
- C$10,500
- D$10,000
Show answer & explanationAnswer & explanation
Correct answer: A. $10,700
Rescission requires the purchase price plus interest at the legal rate, minus any income received. Interest = $10,000 × 6% × 2 years = $1,200. Total = $10,000 + $1,200 − $500 (dividends) = $10,700.
Why the other options are wrong
- B. Fails to subtract the dividends already paid to the investor.
- C. Incorrectly omits the interest calculation.
- D. Ignores both interest owed and dividends received.
Rescission Offer Calculation
A valid rescission offer must return the purchase price plus interest at the legal rate, reduced by any income the buyer already received.
- Formula: Purchase price + interest − income received.
- Interest calculated at the state's legal rate, simple interest.
- Acceptance of a bona fide offer generally bars further legal action on that transaction.
Memory trick: 'Add the interest, subtract the dividends — that's the rescission math trick.'