Before you can understand who must register, who can be regulated, and who can be penalized under the Uniform Securities Act (USA), you need to know who qualifies as a "person."
The Broad Definition
- A person means an individual, a corporation, a partnership, an association, a joint-stock company, a trust (where the interests of the beneficiaries are evidenced by a security), an unincorporated organization, a government, or a political subdivision of a government
- The definition is intentionally broad: it covers both natural persons (individuals) and legal entities (corporations, partnerships, trusts, governments)
Think of it this way: "Person" under the USA is not just a human being. It is any entity that can buy, sell, or issue securities. A corporation, a city government, a trust, and an individual are all "persons."
Who IS a Person
| Entity | Notes |
|---|---|
| Individual | Any living adult with legal capacity |
| Corporation | Including LLCs and other business entities |
| Partnership | General and limited partnerships |
| Association | Trade groups, professional associations |
| Joint-stock company | A hybrid between a partnership and corporation |
| Trust | Where beneficiary interests are evidenced by a security |
| Unincorporated organization | Clubs, informal business groups |
| Government | Federal, state, or foreign governments |
| Political subdivision | Cities, counties, municipalities |
Who is NOT a Person
Three categories of individuals are excluded because they lack legal capacity or standing:
- Deceased individuals: no legal standing
- Minors: lack legal capacity to enter contracts
- Mentally incompetent individuals: lack legal capacity to enter contracts
Exam Tip: Gotchas
- A minor cannot be a "person" under the USA. If a question involves someone under 18 entering a securities transaction, they lack legal capacity. The same applies to deceased and mentally incompetent individuals.
Governments as Persons
This is one of the most counterintuitive parts of the definition. When a city issues municipal bonds, the city is acting as a "person" under the USA; specifically, as an issuer.
- State and local governments regularly issue bonds to fund infrastructure, schools, and public projects
- Under the USA, these governments are "persons" who issue securities
- This means the Act's provisions can apply to government issuers, not just private companies
Exam Tip: Gotchas
- A government IS a "person" under the USA. A municipality that issues bonds is a "person" acting as an issuer. "Person" is not limited to individuals or private entities.