Offers, Sales, and Other Transactions
One important distinction that typically shows up in some form in at least one question on the exam is the difference between an offer to buy or sell securities, an actual transaction, and other exchanges of securities that don’t constitute an offer or transaction.
A sale or purchase is an actual exchange of securities for some type of compensation, or a contract to do one of these things in the future. In addition to the typical cash-for-securities exchange, trading securities for other securities, securities for other types of assets, securities for services, exercising options and gifts of assessable securities all can constitute purchases and sales.
An offer is any attempt to invite another party to engage in a purchase or sale transaction, which includes advertisements for securities. As far as the exam is concerned, regulators are concerned with which state an offer originates in, which state it is directed to, and which state it is accepted in. Each of those states, if they are different, will require an issuer to either register or meet an exemption.
Five important examples to remember that are considered offers are:
- 1. A warrant or right to purchase a security at a set price in the future (warrants are often given as sweeteners on bond pu