Welcome to Exempt Securities (1933 Act): the narrowest unit on the Series 79 outline and a clean three-rule scope. Every offering that escapes the registration spine sits on either an exempt security (this unit) or an exempt transaction (the next unit). The two paths look similar from the issuer's side but are governed by very different rules.
Exam Weight: Part of 27% / 20 items (Function 2). This unit covers a small slice of Function 2 but tests on a tight set of facts: three SEC rules with specific thresholds, deadlines, and definitional carve-outs that the exam writes scenario questions around.
What You'll Learn
In this unit, you'll cover:
- The Exempt-Securities Framework: The distinction between an exempt security (the security itself is registration-free) and an exempt transaction (a specific sale is registration-free), and why this unit covers only three SEC rule citations
- The Traditional Intrastate Offering Safe Harbor: The long-standing safe harbor for local offerings, including the issuer-residence test (state of incorporation), the four "doing business" alternatives, the in-state-only offer-and-sale rule, and the six-month resale lock
- The Modernized Intrastate Offering Exemption: The update that lets issuers solicit out-of-state interest online while still selling only to in-state residents, and how the principal-place-of-business test replaces the state-of-incorporation test
- Regulation A: The two-tier small-issues exemption ("Reg A+") including the $20 million Tier 1 cap, the $75 million Tier 2 cap, the testing-the-waters carve-out, the Tier 2 audit and ongoing reporting requirements, and the NSMIA Blue Sky preemption that drives why Tier 2 dominates deal flow
Why This Matters
This unit is the smallest of the six units in Function 2, but the testable facts are precise. Each rule has signature thresholds (80%, six months, $20 million, $75 million, 10%) and signature mechanics (qualification not registration, Form 1-A not S-1, Tier 2 audited financials required while Tier 1 audited financials not required). The exam pairs an issuer profile with an exemption path and tests which threshold or carve-out trips up the deal.
The split between the traditional and modernized intrastate rules is the single most-tested distinction inside this unit. Both rules govern intrastate offerings, both require sales only to in-state residents, and both impose a six-month resale lock. The two places they diverge (the issuer-residence test and whether out-of-state offers are allowed) are exactly where the exam scenarios land.
A note on rule citations: The Securities Act of 1933 numbers its exemption paragraphs heavily, and most prep materials cite those paragraph numbers. The exam tests substance: which path lets a local Texas brewery raise capital online from Texas residents, what the Reg A Tier 2 cap is, when the 80% doing-business threshold applies. This unit teaches the substance and skips the paragraph-citation trivia.
Let's start with the framework: how the 1933 Act splits exemptions into "exempt security" and "exempt transaction" buckets, and why this unit covers only three of the many possible exemption paths.