Registration by Filing (Notification)
With the foundational definitions in place, you can now explore the three registration methods. Registration by filing is the simplest procedure but has the most stringent eligibility requirements.
Overview
Registration by filing (also called registration by notification) under Uniform Securities Act (USA) Section 302 is designed for large, established issuers that already have extensive Securities and Exchange Commission (SEC) reporting histories. The logic is simple: if a company has been publicly reporting to the SEC for years and meets strict financial tests, the state does not need to conduct its own detailed review.
Eligibility - Two Categories
Category A: Established Issuers
To register by filing, an issuer filing a federal registration statement must meet ALL of the following:
| Requirement | Threshold |
|---|---|
| Organization | Organized under US or state law (or has a US agent for service of process) |
| Operating history | Actively engaged in business in the US for at least 36 consecutive months before federal filing |
| SEC reporting | Registered a class of equity securities under Securities Exchange Act (SEA) Sections 12(b) or 12(g), held by 500+ persons of record |
| Net worth (Option A) | Total net worth of $4,000,000 |
| Net worth (Option B) | Total net worth of $2,000,000 AND net pretax income from operations for at least 2 of the 3 preceding fiscal years |
| Public float | Not less than 400,000 units of the registered class held by the public (excluding officers, directors, underwriters, 10%+ holders) |
| Insider options | Outstanding warrants/options held by underwriters, executive officers, and directors do not exceed 10% of total shares to be outstanding after the offering |
| SEC compliance | Filed all required material under SEA Sections 13 and 14 for at least 36 calendar months before filing |
| Market makers | At least 4 market makers for the registered class during at least 30 days of the 3 months preceding the offering |
| Underwriter participation | Each underwriter and broker-dealer (BD) offering in the state is a member of a national securities association; underwriters contracted to purchase in a principal capacity |
| Underwriting compensation | Aggregate commissions or discounts do not exceed 10% of aggregate public offering price |
| No defaults | Neither issuer nor subsidiaries have failed to pay preferred dividends/sinking fund, defaulted on debt, or defaulted on material long-term leases since end of last fiscal year |
| Minimum share price | Equity securities priced at not less than $5 per share |
Category B: Open-End Investment Companies and UITs
These entities must have previously qualified securities under Section 303 or 304 within the preceding 24 months (or the sponsor of a substantially identical unit investment trust (UIT) has done so), remain in compliance, and have no material changes to terms, methods, objectives, or pricing.
Exam Tip: Gotchas
Registration by filing has the MOST STRINGENT eligibility requirements (36-month operating history, $4M net worth, 500+ shareholders, $5 minimum price) but the SIMPLEST filing procedure. Do not confuse "easy to file" with "easy to qualify." The exam loves to test whether a given issuer meets the thresholds.
Filing Requirements
Despite the strict eligibility, the actual filing is minimal:
- Statement demonstrating eligibility for registration by filing
- Name, address, and form of organization of the issuer
- For non-issuer distributions: name, address, holdings, and reasons for offering
- Description of the security being registered
- Copy of the latest prospectus filed under Securities Act (SA) Section 10
- Information specified in Section 305(c): amount to be offered in the state, states where registration is filed, any adverse orders
- Consent to service of process (Section 414(g))
Effective Date
Registration by filing becomes effective concurrently with the federal registration statement if:
- All required information and documents have been on file for at least 5 business days (or a shorter period the Administrator allows)
- The applicable registration fee has been paid
- No stop order is in effect and no proceeding is pending under Section 306
If the federal registration becomes effective before state conditions are met, the state registration becomes effective when all conditions are satisfied.
The registrant must promptly notify the Administrator (by telephone or telegram) of the federal effective date and price amendment content.
Exam Tip: Gotchas
The waiting period for registration by filing is 5 business days. Compare this to 10 days for coordination. The exam frequently tests these time periods. Also remember: the Administrator can shorten (but not eliminate) the waiting period.