An agent effects an isolated nonissuer transaction. Under the USA this is:
- A.Always prohibitedThis treats an exemption as a ban. The Act singles out isolated nonissuer trades as a category it declines to police at the registration level, not one it outlaws.
- B.FraudNo deception appears in the facts. Exempt status never immunizes anyone from the antifraud provisions, but whether an exemption applies and whether someone lied are separate inquiries.
- C.An exempt transactionCorrect - isolated nonissuer trades are exempt.
- D.Requiring full registrationThat is the outcome this exemption exists to spare. Because the trade is isolated and not made on the issuer's behalf, the registration requirement is lifted for it.
Why: An isolated nonissuer transaction is an exempt transaction.
Harold Fenn, a retired accountant who has never been registered in any capacity, sells 6,000 shares of a closely held printing company to a single acquaintance. It is the only securities sale Harold has made in his lifetime, and he uses no advertising and pays no one to find the buyer. Under the Uniform Securities Act, this sale is:
- A.A nonexempt transaction, because Harold received the sale proceeds and therefore acted as the issuerReceiving proceeds makes him the seller, not the issuer. The issuer is the company that created the shares.
- B.A nonexempt transaction, because the shares of a closely held company are not registered in the stateRegistration status of the security does not defeat a transaction exemption; the exemption is what permits the sale.
- C.An exempt transaction, because it is an isolated nonissuer transactionCorrect. A one-time sale by someone other than the issuer, not part of a course of business, fits the isolated nonissuer exemption.
- D.An exempt transaction only if Harold first files a notice of the sale with the AdministratorNo notice filing is required for an isolated nonissuer transaction under the Act.
Why: An isolated nonissuer transaction is an exempt transaction. Harold is not the issuer, the sale is a one-time event rather than part of a course of business, and no solicitation apparatus is involved.