Registration Requirement
Before diving into the three registration methods, you need to understand the foundational rule: no security may be offered or sold in a state without registration (or an exemption).
The General Rule
Under the Uniform Securities Act (USA), it is unlawful for any person to offer or sell any security in a state unless one of three conditions is met:
- The security is registered under the Act
- The security or transaction is exempted under Section 402
- The security is a federal covered security under Section 307
This prohibition applies to offers as well as sales. You cannot even solicit an offer to buy before the registration statement is effective.
Broad Definition of "Offer" and "Sale"
Section 401(k) defines "offer" and "sale" broadly:
- Every contract of sale or disposition of a security for value
- Every attempt or offer to sell or dispose of a security for value
- Every solicitation of an offer to buy a security for value
Exam Tip: Gotchas
Section 301 prohibits offers AND sales. A common exam trap presents a scenario where someone "only" makes an offer (not a sale) and asks whether registration is required. The answer is yes: offers alone trigger the registration requirement.
Three Methods of State Registration
The USA provides three distinct methods for registering securities at the state level:
| Method | USA Section | Who Uses It | Effective Date |
|---|---|---|---|
| Registration by Filing (Notification) | 302 | Established issuers meeting strict financial tests | Concurrent with federal effectiveness |
| Registration by Coordination | 303 | Any issuer also registering with the SEC | Concurrent with federal effectiveness (if conditions met) |
| Registration by Qualification | 304 | Any issuer (including intrastate-only offerings) | Only when the Administrator orders |
Key points about these three methods:
- All three are subject to the same stop-order standards under Section 306
- If a security is eligible for more than one method, the registrant chooses which to use
- A registered broker-dealer may file a registration statement on behalf of the issuer
Exam Tip: Gotchas
Registration by qualification is the ONLY method that does not require a concurrent federal registration with the Securities and Exchange Commission (SEC). It is used for securities offered exclusively within one state or in situations where no federal registration is filed.