Quick Answer
The Securities Act of 1933 requires every securities offering to be registered unless it qualifies for an exemption. Two exemption paths exist: an exempt security (the security itself is registration-free) under one bucket of the Act, and an exempt transaction (a specific sale is registration-free) under another bucket. This unit covers only three SEC paths on the exempt-security side: the traditional intrastate offering safe harbor, the modernized intrastate offering exemption, and Regulation A.
Before any rule mechanics, the framework matters: the 1933 Act presumes registration. Every offer or sale of securities must be registered with the SEC unless the issuer can fit the offering into a recognized exemption. The exemption framework splits into two top-level categories, and this unit covers only one of them.
Exempt Security vs Exempt Transaction
The 1933 Act creates two exemption buckets. They sound similar but behave very differently in practice.
| Bucket | What It Exempts | Effect | Examples |
|---|---|---|---|
| Exempt security | The security itself, regardless of who is selling it | The security category never requires registration: issuer offerings, secondary sales, and resales are all registration-free | U.S. Treasury securities, municipal bonds, bank-issued securities, intrastate offerings (traditional and modernized), Regulation A qualified offerings |
| Exempt transaction | A specific sale by a specific seller in specific conditions | Only the particular transaction is registration-free; the same security may need registration in a different sale | Private placements (Regulation D), Regulation S offshore offerings, public-information-and-volume resales of restricted securities, institutional-resale offerings, dealer exemptions |
The practical consequence: a security that lives in the exempt-security bucket can change hands freely once issued (subject to any path-specific resale legend). A security sold through an exempt-transaction path is restricted at the moment of sale and can only be resold through another exemption or registration.
Think of it this way: An exempt security is like a class of cargo that the customs office never inspects: every shipment passes through. An exempt transaction is like a specific shipment cleared through a courier program: that shipment passes, but the same goods in a different shipment may need to be inspected again.
Exam Tip: Gotchas
- Exempt security = category-wide pass; exempt transaction = sale-specific pass. The exam will write scenarios that ask which bucket applies. A bank-issued debt security is exempt as a security; a Regulation D private placement of common stock is exempt as a transaction.
- The next unit covers exempt transactions. Regulation D, Regulation S, and institutional-resale paths all belong to that unit. They do not belong here. If the scenario involves an institutional resale or a private placement, you are in the exempt-transaction unit.
What This Unit Covers (and What It Does Not)
The FINRA outline scopes this unit narrowly. It enumerates three SEC paths on the exempt-security side and stops there.
| Path | Substance | What It Covers |
|---|---|---|
| Traditional intrastate offering safe harbor | Long-standing intrastate path | Issuer and buyers all in the same state, state-of-incorporation issuer test, six-month resale lock |
| Modernized intrastate offering exemption | Update for the internet era | Same in-state-sale requirement but principal-place-of-business issuer test and out-of-state online offers permitted |
| Regulation A | Conditional small-issues exemption (Tier 1 and Tier 2 / "Reg A+") | Up to $20 million (Tier 1) or $75 million (Tier 2) raised over 12 months under a qualified offering statement (Form 1-A) |
What this unit does not cover:
- Other exempt securities not enumerated by the outline (bank-issued securities, commercial paper, charitable-organization securities, government and agency securities)
- Regulation D, Regulation S, and the institutional-resale paths (those are exempt transactions in the next unit)
- Crowdfunding offerings under the JOBS Act Regulation Crowdfunding rules (those are exempt transactions, also next unit)
Exam Tip: Gotchas
- The Series 79 exempt-security scope is three paths: the traditional intrastate safe harbor, the modernized intrastate exemption, and Regulation A. Other exempt-security categories exist under the 1933 Act, but the exam writes its exempt-security questions around these three. Resist the urge to expand the scope when reviewing.
- The traditional and modernized intrastate paths are siblings, not the same rule. Both govern intrastate offerings, both require sales only to in-state residents, and both impose a six-month resale lock. They diverge on the issuer-residence test and on whether out-of-state offers are allowed. The exam tests that divergence directly.
Common Threads Across the Three Paths
Before drilling into each path individually, three patterns repeat across all three and are worth keeping in mind:
- No SEC registration statement is filed. None of the three paths involves an S-1 or S-3. The two intrastate paths file nothing with the SEC. Regulation A files a Form 1-A "offering statement" that the SEC reviews and "qualifies" (not "registers")
- State Blue Sky law still applies in most cases. The two intrastate paths are state-confined by definition; the state's securities regulator governs the offering. Regulation A Tier 1 is subject to state Blue Sky review (NASAA runs a coordinated review program). Regulation A Tier 2 is preempted from state registration under the National Securities Markets Improvement Act of 1996 (NSMIA), but states keep notice-filing, fee, and anti-fraud authority
- Resale rules vary. The two intrastate paths lock resales to in-state residents for six months. Regulation A qualified securities are freely tradable once issued (no resale lock) because the qualification process itself is a public-disclosure event
Exam Tip: Gotchas
- None of the three paths involves an S-1 registration statement. If the scenario says the issuer "registered the offering with the SEC on Form S-1," it is not an exempt-securities scenario. It is a registered public offering (the spine covered in the public-offerings unit).
- Regulation A is "qualified," not "registered." The SEC issues a notice of qualification on Form 1-A. Calling a Regulation A deal "registered" is technically wrong even though the qualification process involves SEC review of disclosure.