Federal Covered Securities: Notice Filing
Stop orders apply to securities that must be registered at the state level. But what about securities that are exempt from state registration because they are regulated at the federal level? This section covers the Administrator's limited but important authority over federal covered securities.
What Are Federal Covered Securities?
Federal covered securities are securities that are exempt from state registration under Section 18 of the Securities Act of 1933 (as added by NSMIA, the National Securities Markets Improvement Act of 1996).
The key rule:
- States cannot require these securities to be registered at the state level
- However, states can require notice filings and fees
Notice Filing Requirements (USA Section 307)
The Administrator may by rule or order require the filing of:
- Documents that are part of the federal registration statement filed with the SEC, plus a consent to service of process and applicable fees
- Amendments to the federal registration statement (filed concurrently)
- A report of the value of federal covered securities offered or sold in the state, with applicable fees
Regulation D Offerings (Section 18(b)(4)(D))
For Reg D private placement covered securities, the Administrator may require:
- Filing of a notice on SEC Form D
- A consent to service of process signed by the issuer
- Filing no later than 15 days after the first sale in the state
- Payment of applicable fees
Exam Tip: Gotchas
- Reg D notice filing is tied to the FIRST SALE, not the first offer. Form D filing must occur within 15 days of the first sale in the state, not from the date of the offering.
Administrator's Stop Order Power Over Federal Covered Securities (USA Section 307(d))
The Administrator may issue a stop order suspending the offer and sale of a federal covered security if:
- The order is in the public interest, AND
- There is a failure to comply with any condition established under Section 307 (e.g., failure to file notice, failure to pay fee)
Critical exception: The Administrator may not issue a stop order against securities covered under Section 18(b)(1) of the Securities Act of 1933.
Section 18(b)(1) securities include:
- NYSE-listed securities
- NASDAQ-listed securities
- Other national exchange-listed securities
| Type of Federal Covered Security | Can Administrator Issue Stop Order? |
|---|---|
| Exchange-listed securities (18(b)(1)) | No; fully preempted from state stop order authority |
| Reg D offerings (18(b)(4)(D)) | Yes; for failure to comply with notice filing requirements |
| Other federal covered securities | Yes; for failure to comply with Section 307 conditions |
Exam Tip: Gotchas
- NYSE/NASDAQ-listed securities (18(b)(1)) are fully off-limits to state stop order authority. The Administrator cannot block their sale under any circumstances.
- Reg D offerings (18(b)(4)(D)) are different. The Administrator can issue a stop order if the issuer fails to comply with notice filing requirements.
Waiver
The Administrator may by rule or order waive any or all provisions of Section 307. This gives the Administrator flexibility to reduce the burden of notice filing requirements when appropriate.