What are the registration requirements under state law?

Registration pursuant to federal law focuses on disclosure of information to offerees and purchasers. States adopt this approach, but also may impose a test to make certain the security being issued meets certain quality standards. This is known as a merit review. The merit review examines certain qualities, such as the financial stability of the company making the issuance. Other examinations may focus on the terms or rights associated with the issued security.

State Law Securities Registration Process?

States generally employ one of three registration methods for issuers of securities:

What is Registration by Qualification? 

Some states require issuers to undergo a full-blown registration, complete with a merit review. Issuers registering with the SEC must file duplicate documents with the states administrative agency regulating securities. Unless a state official objects, the state registration becomes effective automatically when the federal registration statement is deemed effective.

What is Registration by Notification?

Some states permit issuers with an established track record to simply file a notice before offering their securities. This allows issuers to offer securities for sale automatically after a stated time period expires unless the state administrative agency takes action to prevent the offering.

What is Registration by Coordination?

Some states permit issuers that have registered with the SEC to file copies of the federal registration statement (and perhaps some additional documents) with the state. This process requires a more detailed disclosure by the issuer. A security cannot be offered for sale until the administrative agency grants the issuer a license or certificate to sell securities.

Note: Alternatives forms of coordinated registration exist and are discussed below.

Related Topics

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