Registration by Filing (Notice Filing)
Registration by filing, also known as notice filing, is the simplest form of state securities registration. It applies to federal covered securities—securities that are exempt from state registration under the National Securities Markets Improvement Act (NSMIA) but may still require state notice filings.
What Are Federal Covered Securities?
The National Securities Markets Improvement Act of 1996 (NSMIA) created the category of "federal covered securities" to reduce duplicative state and federal regulation.
Categories of Federal Covered Securities
| Category | Examples |
|---|---|
| Exchange-Listed Securities | NYSE, NASDAQ, AMEX listed stocks |
| Investment Company Securities | Mutual funds registered under 1940 Act |
| Rule 506 Offerings | Regulation D private placements |
| Qualified Purchaser Offerings | Sales to sophisticated investors |
Key Principle: Federal covered securities are subject to SEC jurisdiction and cannot be required to register at the state level. States can only require notice filings and fees.
Exchange-Listed Securities
Securities listed on major exchanges are federal covered:
| Exchange/Market | Federal Covered? |
|---|---|
| NYSE | Yes |
| NASDAQ Global Select | Yes |
| NASDAQ Global Market | Yes |
| NYSE American (AMEX) | Yes |
| OTC Bulletin Board | No |
| Pink Sheets | No |
All Securities of Listed Issuers
Important: If an issuer's common stock is listed on a qualifying exchange, ALL of that issuer's securities are federal covered—not just the listed security.
| Security | Federal Covered? (if issuer's common is listed) |
|---|---|
| Common stock | Yes |
| Preferred stock | Yes |
| Bonds | Yes |
| Warrants | Yes |
| Options | Yes |
Investment Company Securities
Securities issued by investment companies registered under the Investment Company Act of 1940 are federal covered:
| Product | Federal Covered? |
|---|---|
| Open-end funds (mutual funds) | Yes |
| Closed-end funds | Yes |
| Unit Investment Trusts (UITs) | Yes |
| Exchange-Traded Funds (ETFs) | Yes (if 1940 Act registered) |
Regulation D Rule 506 Offerings
Private placements under SEC Rule 506 are federal covered:
| Rule 506 Version | Description | Federal Covered? |
|---|---|---|
| Rule 506(b) | Traditional private placement, no general solicitation | Yes |
| Rule 506(c) | General solicitation permitted, all accredited investors | Yes |
State Notice: While Rule 506 offerings are federal covered and exempt from state registration, states may require Form D notice filings and collect fees.
Notice Filing Requirements
What States Can Require
| Requirement | Permitted? |
|---|---|
| Full state registration | No |
| Notice filing | Yes |
| Filing fees | Yes |
| Consent to service of process | Yes |
| Stop orders for fraud | Yes |
What States Cannot Require
| Requirement | Permitted? |
|---|---|
| Merit review | No |
| Substantive review | No |
| Denial based on fairness | No |
| Additional disclosure beyond SEC | Generally no |
The Notice Filing Process
For Investment Company Securities
| Step | Requirement |
|---|---|
| Documents | Copy of SEC registration statement or prospectus |
| Filing | Submit to state Administrator |
| Fee | Pay state-required fee |
| Effectiveness | Effective when SEC effective |
For Rule 506 Offerings
| Step | Requirement |
|---|---|
| Documents | Copy of Form D filed with SEC |
| Timing | Within specified period after first sale |
| Fee | State-required amount |
| Consent | Consent to service of process |
Effective Date
Registration by filing becomes effective:
| Security Type | When Effective |
|---|---|
| Investment company | When SEC registration effective |
| Rule 506 offering | Upon filing (retroactive to first sale) |
| Exchange-listed | Generally no registration required |
State Anti-Fraud Authority
Although states cannot require registration of federal covered securities, they retain full authority to:
| Authority | Description |
|---|---|
| Investigate fraud | Examine suspicious activities |
| Enforce anti-fraud rules | Take action against fraud |
| Issue subpoenas | Compel information |
| Seek injunctions | Stop fraudulent conduct |
| Criminal referrals | Refer for prosecution |
Exam Tip: States cannot require registration of federal covered securities, but they absolutely CAN enforce anti-fraud provisions against ANY securities transaction.
Comparison of Filing Methods
| Feature | Notice Filing | Coordination | Qualification |
|---|---|---|---|
| When Used | Federal covered | SEC offerings | Intrastate |
| State Review | None | Limited | Full |
| Complexity | Simplest | Moderate | Most complex |
| State Can Deny? | No (except fraud) | Yes | Yes |
| Documents | Copy of SEC filing | SEC documents | State-specific |
Practical Examples
Example 1: Mutual Fund
Vanguard's Total Stock Market Index Fund (1940 Act registered) wants to sell shares in California.
Process:
- File notice with California
- Pay filing fee
- Registration effective when SEC effective
- California cannot conduct merit review
Example 2: Rule 506 Private Placement
Tech startup raises $5 million from accredited investors under Rule 506(c).
Process:
- File Form D with SEC
- File copy of Form D with each state where sales made
- Pay state filing fees
- States cannot deny but can enforce anti-fraud rules
Key Takeaways
- Federal covered securities cannot be required to register at state level
- States can require notice filings and fees
- Exchange-listed securities and 1940 Act investment companies are federal covered
- Rule 506 offerings are federal covered
- States retain anti-fraud authority over all securities
- Notice filing is the simplest registration method
- NSMIA preempts state substantive review of federal covered securities
Under the National Securities Markets Improvement Act (NSMIA), which of the following is NOT a federal covered security?
A state Administrator wants to require full registration of a mutual fund before it can be sold in the state. Under NSMIA, can the Administrator do this?
A company's common stock is listed on the NASDAQ Global Market. The company wants to issue bonds. Are the bonds federal covered securities?
What authority do states retain over federal covered securities?
3.5 Exempt Securities and Transactions
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