Chapter 8 Practice Question Answers
- 1. Answer: C. The intrastate offering exemption is only available for securities that will be both offered for sale and sold in a single state or territory. Therefore both options I and IV are true. The intrastate offering exemption does not have a monetary cap, so option II is not true. To qualify for the exemption, an issuer must derive at least 80% of its revenue from the state where it is resident or incorporated; there is no requirement that the issuer derive no revenue from interstate sources, and therefore option III is incorrect.
- 2. Answer: B. The intrastate offering exemption is available for certain geographically limited offerings. To meet the requirements of this exemption, the business must have its principal place of doing business in the state and must satisfy at least one of the following requirements:
- • 80% of revenues must come from within the state
- • 80% of business assets must come from within the state
- • 80% of the proceeds must be used in-state
- • The majority of people employed by the issuer must live in the state
Additionally, the issuer must have a reasonable belief that each purchaser is a resident of the state, and the purchaser must verify in writing that he is indeed a resident.
- 3. Answer: B. The SEC’s Rule 147 defines “doing business within” a state or territory to include deriving at least 80% of revenues from within that state.
- 4. Answer: D. Regulation A exempts offerings of $50 million or less from registration, provided certain requirements are met. Answer choice A is incorrect because Regulation A limits sales by insiders to $15 million. Regulation A requires an issuer to file an offering statement with the SEC; answer choice B is incorrect because, although offers may be made any time after the offering statement is filed, sales may not be made until the offering statement is “qualified” by the SEC,