Covered securities are securities that are exempt from state registration requirements under the National Securities Markets Improvement Act (NSMIA). Securities sold under Rule 506(b) or Rule 506(c) qualify as covered securities, meaning states cannot require registration of the offering itself.
Why It Matters
Without covered securities status, a fund would need to register its offering in every state where it sells to investors. That process would be expensive, time-consuming, and in many cases impractical. Covered securities status is what makes nationwide private fundraising workable under Regulation D.
Key Details
- Federal preemption prevents states from requiring offering registration for Rule 506 securities.
- States can still require notice filings and collect filing fees, even for covered securities.
- States retain full anti-fraud authority over offerings conducted within their borders.
- Blue Sky filings for covered securities are notice filings, not registration. The state does not approve or deny the offering.
- Covered securities status applies to Rule 506 offerings but does not apply to Rule 504 offerings.
For more, see Form D and Blue Sky Filings.
Capital Company tracks state notice filing requirements and deadlines as part of fund administration.
This content is for informational purposes only and does not constitute legal, tax, or compliance advice. Consult qualified counsel for guidance specific to your situation.