Quick Answer
The Securities Act of 1933 presumes registration; an exempt security is registration-free by category. This unit covers three paths: the traditional intrastate safe harbor (incorporation AND principal place of business, in-state offers and sales), the modernized exemption (principal place of business only, out-of-state offers allowed), and Regulation A (Tier 1 up to $20 million, Tier 2 up to $75 million).
The whole unit on one sheet: the exempt-security framework, both intrastate paths, and Regulation A's two tiers, with the thresholds the exam writes scenarios around.
Which One-Liners Win Points?
- Exempt security = category-wide pass; exempt transaction = sale-specific pass. Regulation D (private placements) and Regulation S are exempt transactions and live in the NEXT unit.
- This unit's scope is exactly three paths: traditional intrastate safe harbor, modernized intrastate exemption, and Regulation A.
- None of the three paths files an SEC registration statement (Form S-1). The two intrastate paths file nothing with the SEC; Regulation A files Form 1-A and is "qualified," not "registered."
- Traditional issuer-residence test = incorporation AND principal place of business (both required); modernized = principal place of business only.
- Both intrastate paths require actual or reasonably-believed in-state residency at sale; a written representation alone is not enough.
- Traditional bars out-of-state OFFERS; modernized allows out-of-state offers but bars out-of-state SALES. Both paths forbid out-of-state sales; neither files with the SEC, and state Blue Sky registration is mandatory for both.
- The doing-business test needs only ONE of four alternatives: 80% of revenues, 80% of assets, 80% of net proceeds, or a majority of employees in-state.
- Regulation A qualified securities are freely tradable on qualification (no resale lock); the two intrastate paths lock resales to in-state residents for six months, and an entity purchaser formed just to acquire the securities looks through to its beneficial owners.
- Tier 1 needs no audited financials, uses state Blue Sky review (NASAA coordinated review available), and exits with Form 1-Z only. Tier 2 requires audited financials, is NSMIA-preempted from state registration only (states keep notice filings, fees, and antifraud), and reports ongoing (Form 1-K annual, 1-SA semi-annual, 1-U current).
- Testing the waters is permitted both before and after the Form 1-A filing; indications of interest are not binding.
Which Numbers Matter Most?
| Item | Value |
|---|---|
| Doing-business test alternatives | 80% of revenues, assets, or net proceeds in-state, OR a majority (more than 50%) of employees in-state |
| Intrastate resale restriction (both paths) | Six months to in-state residents only, from the issuer's sale date |
| Regulation A Tier 1 | ≤$20 million per 12 months; ≤$6 million affiliate sub-cap |
| Regulation A Tier 2 | ≤$75 million per 12 months; ≤$22.5 million affiliate sub-cap |
| Tier 2 non-accredited investor limit | 10% of the greater of annual income or net worth, per offering (unless exchange-listed upon qualification) |
| Bad-actor beneficial-owner threshold | 20%+ voting-equity owner is a covered person; a disqualifying event blows up the offering, both tiers |
Which Gotchas Trip Students Up?
- Three thresholds are 80%; the employees alternative is "majority" (more than 50%). The four doing-business alternatives are alternatives, not cumulative.
- Out-of-state offers break the traditional safe harbor even without a sale; a public website reaching an out-of-state viewer disqualifies the whole offering. The modernized exemption fixes exactly this, but it is a separate, stand-alone SEC exemption, not the same rule on different footing.
- The six-month resale lock starts at the issuer's sale, not at a later resale. A secondary buyer is locked in-state for the remainder of the six months, not for a fresh six.
- The Tier 2 cap is $75 million, not $50 million. Materials citing $50 million are pre-2021.
- The 10% investor cap applies ONLY to Tier 2 and ONLY to non-accredited investors, and it is 10% of the GREATER (not lesser) of income or net worth.
- Selling-securityholder sub-caps sit WITHIN the offering total, not on top of it. The $6 million and $22.5 million affiliate caps are part of the $20 million and $75 million totals.
- Filed Form 1-A means Regulation A; filed Form D means Regulation D (an exempt transaction, next unit), not an intrastate path.
One-Breath Recap
The 1933 Act presumes registration, so an exempt security is the category-wide pass this unit covers on three paths: the traditional intrastate safe harbor (BOTH incorporation and principal place of business in-state, bars out-of-state offers), the modernized exemption (drops incorporation, allows out-of-state offers), and Regulation A. Both intrastate paths forbid sales to anyone but an actual or reasonably-believed in-state resident, share the four doing-business alternatives (80% revenues, assets, or net proceeds, or a majority of employees), and lock resales in-state for six months. Regulation A is qualified, not registered, splitting into Tier 1 (up to $20 million, no audit) and Tier 2 (up to $75 million, audited, NSMIA-preempted, 10% non-accredited cap, ongoing reporting); its securities trade freely on qualification, unlike the intrastate lock.
Need more than the recap? Read the full Exempt Securities (1933 Act) unit.