NASAA Series 66 Uniform Combined State Law ExaminationLaws, Regulations, and Guidelines, including Prohibition on Unethical Business PracticesEasy
A recent college graduate is considering various investment options and receives an unsolicited email from a website promoting 'guaranteed 20% returns' on a new cryptocurrency investment. The website provides no contact information other than an email address and a generic 'support' chat. The offer is not registered with any state or federal authority. Under the Uniform Securities Act, what is this most likely an example of?
- AA legitimate offering using an accredited investor exemption.
- BA federal covered security, exempt from state registration.
- CAn unregistered securities offering, which is a violation.
- DA legitimate private placement offering.
Show answer & explanationAnswer & explanation
Correct answer: C. An unregistered securities offering, which is a violation.
Offering a security to the public without proper registration, especially with 'guaranteed' high returns and lack of transparency, is a hallmark of an unregistered securities offering, which is a violation of the Uniform Securities Act.
Why the other options are wrong
- A. Accredited investor exemptions typically apply to private placements, not public, unsolicited offers, and still require specific disclosures and conditions.
- B. Federal covered securities are exempt from state registration but still require federal registration or an exemption from federal registration, none of which is indicated here. The 'guaranteed 20% returns' also points to a likely fraud.
- D. Private placements have specific rules and typically involve sophisticated investors, not unsolicited public emails promising guarantees.
Unregistered Securities Offering
The offering or sale of securities to the public without having them properly registered with the appropriate state or federal regulatory authorities, or without qualifying for a valid exemption.
- Generally illegal under securities laws.
- Often characterized by promises of high, guaranteed returns.
- Lacks transparency and legitimate contact information.
Memory trick: If it's too good to be true and not registered, it's probably a no-go.