State Registration and Post-Registration Requirements

The whole unit on one sheet: the requirement, the three methods, stop orders, and federal covered securities.

What Does the Registration Requirement Cover?

• It is unlawful to offer OR sell a security in a state unless it is registered, exempt, or federal covered. An offer alone triggers the requirement; you cannot solicit before effectiveness.
• If a security qualifies for more than one method, the registrant chooses, and a registered broker-dealer may file for the issuer.

What Are the Three Registration Methods?

• Filing (notification) has two routes. The main one covers large seasoned issuers with long SEC reporting histories and strong financials: toughest eligibility, simplest procedure, effective concurrently with the federal registration once it has been on file the required period, the fee is paid, and no stop order is pending. The second route covers open-end funds and unit investment trusts with a prior in-state qualification, either their own within 24 months or (UIT only) a sponsor's registration of a substantially identical UIT with no time limit. That route is effective on the business day of filing or expiration of the existing registration, whichever is last, with no federal tie.
• Coordination is the common method when registering federally and in the state for the same offering, with no financial or operating-history tests. It is effective automatically when the federal statement becomes effective, provided no stop order is pending and the required documents, including proposed offering prices and underwriting compensation, have been on file the required period.
• Qualification is the only method needing no federal registration. Any security qualifies, the filing is the most burdensome, and it is effective only when the Administrator orders.

What Applies to All Methods, and How Do Stop Orders Work?

• Every registration is effective for one year, longer if still being distributed in a non-exempt transaction. Withdrawal is barred for one year while same-class securities remain outstanding.
• The Administrator may require prospectus delivery to each offeree, but may not demand reports more often than quarterly.
• Escrow and impounding reach coordination and qualification only, never filing.
• A stop order can deny, suspend, or revoke effectiveness. It needs the public interest AND a statutory ground, and it is an administrative tool, not a penalty.
• A summary suspension can come first. On written request the Administrator must set a hearing within 15 days, and may also order one unprompted. A final stop order needs notice, a hearing opportunity, and written findings.

What Are Federal Covered Securities?

• Created by the National Securities Markets Improvement Act of 1996, they are exempt from state registration, but the Act preempted state registration, not state anti-fraud authority.
• Investment company, qualified-purchaser-sold, other exempt-offering, and the uncapped Regulation D tier may still owe a state notice filing and fee. Exchange-listed covered securities owe neither. Smaller-dollar Regulation D offerings are not federal covered at all.
• For exchange-listed covered securities the Administrator can never issue a stop order; for the others, stop orders are limited to notice-filing noncompliance, never merit review.

What Is the Federal Offering Timeline?

• Pre-filing: no offers, no sales. Cooling-off: oral offers allowed, written offers only through the preliminary ("red herring") prospectus, tombstone ads allowed, sales prohibited. Post-effective: sales allowed once the final prospectus is delivered.
• A tombstone ad is not a prospectus, not an offer, and does not replace prospectus delivery.

Which One-Liners Win Points?

• Offers alone require registration, not just completed sales.
• Filing has the toughest eligibility but the easiest procedure; "easy to file" is not "easy to qualify."
• Coordination effectiveness rides on the federal registration; qualification is the only method the Administrator controls, and nothing about it is automatic.

Which Numbers Matter Most?

Which Gotchas Trip Students Up?

• Which method for whom: a federal covered security needs no state method at all; no federal filing means qualification; a federal filing without a filing-route path means coordination.
• Escrow and impounding attach to coordination and qualification, not filing.
• The Administrator can enter a coordination stop order without notice or hearing if the registrant fails to report the federal effective date, and it is void if the registrant later proves compliance.
• Federal covered securities still face state anti-fraud enforcement, and exchange-listed ones can never be stop-ordered.

One-Breath Recap

No security is offered or sold in a state unless it is registered, exempt, or federal covered. Filing suits seasoned issuers (toughest eligibility, easiest procedure) and coordination suits anyone registering federally at the same time; both ride the federal registration's effectiveness, except filing's second route for open-end funds and unit investment trusts, which goes effective on the business day of filing or when the existing registration expires, whichever is last. Qualification needs no federal filing and takes effect only when the Administrator orders. Across all methods, registration lasts one year, reports come no more than quarterly, and escrow reaches coordination and qualification but never filing. Federal covered securities skip state registration but keep state anti-fraud exposure.

Need more than the recap? Read the full State Registration and Post-Registration Requirements unit.