What Is the Uniform Securities Act?
The Uniform Securities Act (USA) forms the foundation of state securities regulation and represents 30% of your Series 65 exam.
- 39 questions on laws, regulations, and ethical practices
- Defines who must register (persons) and what must register (securities)
- Establishes exemptions from registration requirements
The Uniform Securities Act is a model state law designed to provide consistency across state securities regulations. Created by the Uniform Law Commission (ULC), it serves as a template that states can adopt and modify to fit their specific regulatory needs.
The current version was published in 2002 and amended in 2005. Thirty-nine states and the District of Columbia have enacted some version of the USA, though each state may have variations in their specific implementation.
The USA Covers Four Main Areas
Securities
What must be registered before being offered or sold
Exemptions
Exceptions from registration requirements
Enforcement
Administrator powers and remedies for violations
The USA represents a significant portion of your exam score, with 39 questions testing precise definitions and distinctions. Our flashcard strategies guide explains how to use FSRS-powered spaced repetition to master the exact language of USA definitions. Critical since many exam questions hinge on a single word like “individual” vs. “person” or “exempt security” vs. “exempt transaction.”
Blue Sky Laws: A Brief History
State securities laws are commonly called “blue sky laws”, a colorful term that originated in the early 20th century to describe the speculative schemes that had nothing backing them but “blue sky.”
Kansas Leads the Way
Kansas enacted the first blue sky law at the urging of banking commissioner Joseph Norman Dolley to protect investors from fraudulent securities schemes.
47 States Follow
By 1933, 47 states had adopted blue sky statutes. Nevada was the only holdout.
Federal Securities Act
The Securities Act of 1933 created federal securities regulation, working alongside state laws.
First Uniform Securities Act
The ULC approved the first widely adopted Uniform Securities Act to bring consistency to state regulations.
NSMIA
The National Securities Markets Improvement Act preempted state regulation of “federal covered securities” and certain advisers.
Current USA
The most recent Uniform Securities Act was published, reflecting modern market practices and federal preemption.
The federal securities laws and state blue sky laws work together but have different jurisdictions. Federal laws (administered by the SEC) primarily regulate national exchanges and large offerings. State laws regulate local offerings and protect local investors. Some matters are exclusively federal, some are exclusively state, and some involve both.
Key Definitions Under the USA
Understanding the precise definitions in the Uniform Securities Act is critical for the Series 65 exam. Many questions hinge on whether someone or something falls within a specific definition.
Person
“Person” is the broadest definition and includes virtually any legal entity:
- An individual (natural person)
- Corporation, partnership, limited liability company
- Trust, estate, business trust
- Association, joint venture
- Government or governmental subdivision
- Any other legal or commercial entity
Firms (Business Entities)
Broker-Dealer: Any person engaged in the business of effecting transactions in securities for the account of others (broker) or for its own account (dealer).
Exclusions:
- Agents (individuals representing a broker-dealer)
- Issuers (companies selling their own securities)
- Banks (when acting within banking activities)
Investment Adviser: Any person who, for compensation, engages in the business of advising others about the value of securities or the advisability of investing in, purchasing, or selling securities.
Exclusions:
- Banks and bank holding companies
- Lawyers, accountants, engineers, teachers (if advice is incidental)
- Broker-dealers (if advice is incidental and no special compensation)
- Publishers of general circulation publications
- Federal covered investment advisers (SEC-registered)
Individuals (Natural Persons)
Agent: An individual (other than a broker-dealer) who represents a broker-dealer or issuer in effecting or attempting to effect purchases or sales of securities.
Key Points:
- Always an individual, never a firm
- Represents a broker-dealer or issuer
- Must register unless exempt
- Partners, officers, directors can be agents if they effect transactions
Investment Adviser Representative (IAR): An individual employed by or associated with an investment adviser who makes recommendations, manages accounts, or solicits advisory services.
Key Points:
- Always an individual, never a firm
- Must pass Series 65 (or Series 66 + Series 7)
- Always registers with the state (never federal-only)
- Clerical and ministerial employees are excluded
A common exam trap is confusing firms with individuals. Remember: Broker-dealers and Investment Advisers are firms (or sole proprietors). Agents and Investment Adviser Representatives are always natural persons (individuals). The exam may try to trick you by asking if a corporation can be an agent (no) or if an individual can be an investment adviser (only as a sole proprietor).
Confusing broker-dealers with agents or investment advisers with IARs is just one of many USA-related traps on the Series 65. Our common mistakes guide identifies all top exam failure patterns, including the specific USA definition confusions that trip up even well-prepared candidates who know the material but miss the subtle wording.
Security
The USA uses a broad definition of “security” that includes any:
Common Securities
- Stock (common and preferred)
- Bonds, debentures, notes
- Warrants and rights
- Mutual fund shares
- Limited partnership interests
- Variable annuities and life insurance
Also Securities
- Investment contracts
- Certificates of deposit for securities
- Voting trust certificates
- Options and futures on securities
- Fractional undivided interests
- Pre-organization certificates
NOT Securities
- Fixed annuities
- Whole life insurance
- Commodities (physical)
- Real estate (unless securitized)
- Collectibles
- Bank CDs
Master USA Definitions & Exemptions
Person, security, investment adviser, agent: the USA has precise definitions that the exam loves to test. CertFuel's FSRS-powered flashcards help you memorize these distinctions, while our Smart Study algorithm tracks whether you're confusing transactional exemptions with registration exemptions.
Access Free BetaRegistration Requirements
The Uniform Securities Act requires both persons and securities to register before conducting business or being offered in a state, unless an exemption applies.
Person Registration
It is unlawful for any person to transact business in a state as a broker-dealer, agent, investment adviser, or IAR unless properly registered or exempt.
| Person Type | Registers With | Registration Requirement |
|---|---|---|
| Broker-Dealer | State + SEC/FINRA | Must register in each state where it has an office or clients |
| Agent | State only | Must register in each state where effecting transactions |
| Investment Adviser | State OR SEC | State if AUM under $100M; SEC if AUM over $110M; either between $100M-$110M (see state registration guide) |
| IAR | State only | Always registers with the state, never federal-only |
When a broker-dealer or investment adviser registers, any partner, officer, or director who would otherwise be required to register as an agent or IAR is automatically registered. This saves administrative burden but still subjects these individuals to regulatory oversight.
Securities Registration
Securities must be registered before being offered or sold in a state unless the security or transaction is exempt. The USA provides three methods of securities registration:
Registration by Coordination
Used when the security is also being registered by coordination federally under the Securities Act of 1933. The state registration becomes effective when the federal registration is effective.
When used: IPOs and other offerings also filed with SEC
Registration by Qualification
The most comprehensive method requiring full disclosure, known as registration by qualification. Used when no federal registration or exemption is available.
When used: State-only offerings not registered federally
Registration by Filing (Notification)
A simplified registration by filing for established issuers with a track record of compliance. Requires only notice and fees.
When used: Subsequent offerings by seasoned issuers
Effective Period
Registrations are effective for one year and must be renewed annually. The registration year runs from a specified date (usually December 31) rather than from the date of registration.
Exemptions from Registration
Not every security or transaction requires registration. The USA provides exemptions in three categories. Understanding the difference between these categories is heavily tested on the Series 65.
Exempt Securities
What it isSecurities exempt based on what they are (the type of security). The exemption follows the security regardless of how it is sold.
Examples:
- U.S. Government securities (Treasury securities: bills, bonds, notes)
- Municipal securities (state and local government bonds)
- Securities issued by banks and credit unions
- Commercial paper (9 months or less, $50,000+ minimum)
- Securities issued by nonprofits (religious, educational, charitable)
- Insurance company securities (not insurance policies themselves)
Exempt Transactions
How it is soldTransactions exempt based on how the security is sold. The same security might require registration in one transaction but not another.
Examples:
- Isolated nonissuer transactions: Secondary market sales by investors
- Transactions with institutions: Sales to banks, insurance companies, institutional investors
- Private placements: Sales to ≤10 retail investors in 12 months (no advertising, no commissions)
- Underwriter transactions: Sales between issuers and underwriters
- Unsolicited orders: Executing trades the customer initiated
- Fiduciary transactions: Court-ordered sales by executors, trustees, receivers
Federal Covered Securities
Federal preemptionFederal covered securities preempted from state registration by federal law (NSMIA of 1996). States may require notice filing and fees but cannot require full registration.
Examples:
- Securities listed on national exchanges (NYSE, NASDAQ, AMEX)
- Securities of SEC-registered investment companies (mutual funds)
- Securities sold to “qualified purchasers” under federal law
- Securities issued under Regulation D, Rule 506 offerings
- Securities sold under crowdfunding exemptions
Even when a security or transaction is exempt from registration, the antifraud provisions of securities law still apply. Exempt does not mean unregulated. Anyone committing fraud in connection with an exempt security or transaction is still subject to enforcement action and liability.
The three categories of exemptions. Exempt securities (what it is), exempt transactions (how it’s sold), and federal covered securities (federal preemption). Are frequently confused on the exam. Our flashcard strategies guide provides techniques for keeping these distinct, using FSRS algorithms to ensure you review the differences at optimal intervals until they’re permanently ingrained.
Memory Trick: Nouns vs. Verbs
Exempt Securities = Nouns
Think of exempt securities as “things” (nouns). Government bonds, municipal bonds, bank securities. What they are makes them exempt.
Exempt Transactions = Verbs
Think of exempt transactions as “actions” (verbs). Private placements, unsolicited orders, institutional sales. How they are sold makes them exempt.
The State Administrator
Each state has a state securities administrator responsible for enforcing the Uniform Securities Act within that state. The title varies by state (Commissioner, Director, Secretary of State), but the powers are similar.
Administrator Powers
The Administrator CAN:
- Deny, suspend, revoke, or condition registrations
- Issue cease and desist orders (with or without a prior hearing)
- Conduct investigations and examinations
- Subpoena witnesses, documents, and records
- Impose civil penalties and seek restitution
- Refer criminal violations to prosecutors
- Adopt rules, regulations, and orders
- Grant exemptions from registration
- Appoint receivers to manage assets of violators
The Administrator CANNOT:
- Impose criminal penalties (only courts can)
- Issue injunctions (only courts can)
- Make arrests (that is law enforcement)
- Sentence violators to prison (only courts can)
Cease and Desist Orders
A cease and desist order is the administrator’s primary enforcement tool. It is a formal order directing someone to stop engaging in specified conduct.
How Cease and Desist Works
Violation Believed
Administrator believes a violation is occurring or about to occur
Order Issued
Administrator issues cease and desist order (no prior hearing required)
Hearing Right
Recipient has 15 days to request a hearing
Court Enforcement
If ignored, administrator can seek court injunction
The administrator issues cease and desist orders. Only a court issues injunctions. If someone ignores a cease and desist order, the administrator must petition a court to enforce it through an injunction.
Grounds for Denial, Suspension, or Revocation
The administrator can deny, suspend, revoke, or condition a registration on various grounds, including:
- Filing incomplete, false, or misleading information
- Conviction of securities-related crimes (misdemeanor or felony)
- Violations of securities laws (state or federal)
- Being subject to orders by other regulators (SEC, FINRA, other states)
- Being insolvent or in financial difficulty
- Lacking proper qualifications or experience
- Engaging in dishonest or unethical practices
Series 65 Exam Tips: Uniform Securities Act
The USA content represents 30% of your Series 65 exam. Master these concepts and common exam traps:
High-Priority Topics
Firm vs. Individual
Broker-dealers and IAs are firms; agents and IARs are always individuals
Exempt Securities vs. Transactions
“What” vs. “How” (nouns vs. Verbs)
Federal Covered
Exchange-listed securities, mutual funds, Rule 506 offerings
Administrator Powers
Can issue cease and desist; cannot issue injunctions or impose criminal penalties
Antifraud Always Applies
Even exempt securities and transactions are subject to antifraud rules
Common Exam Traps
Can a corporation be an agent?
No. Agents are always individuals (natural persons). A corporation can be a broker-dealer, not an agent.
Do exempt securities have to follow antifraud rules?
Yes. Exempt from registration does not mean exempt from fraud rules. All antifraud provisions apply.
Can the administrator impose jail time?
No. Only courts can impose criminal penalties. The administrator refers violations to prosecutors.
Do federal covered advisers register with the state?
The adviser does not register, but their IARs must register with the state. There is no such thing as a “federal covered IAR.”
Definition Quick Reference
| Term | Always | Never |
|---|---|---|
| Agent | An individual | A firm/corporation |
| Broker-Dealer | A person (firm or sole prop) | The agent who works there |
| IAR | State-registered | Federal-only registration |
| Administrator | Can issue cease & desist | Can issue injunctions |
| Exempt Security | Exempt based on what it is | Exempt from antifraud rules |
The USA questions are often definition-based and require memorizing exact language. Our flashcard strategies guide shows how to create effective flashcards for each key term, focusing on what is included and excluded from each definition. The study schedule guide explains how to allocate sufficient time to USA content (30% of your exam) while balancing the other three exam sections.
For more exam topics, explore our guides on fiduciary duty, ethics and prohibited practices, and Series 65 formulas.