Uniform Securities Act

The result is a framework of state securities regulation that is substantially uniform across most jurisdictions while retaining state-specific variations — and that is the primary substantive content tested on the Series 63 Uniform Securities Agent State Law Examination and the state law portions of the Series 65 Uniform Investment Adviser Law Examination and Series 66 Uniform Combined State Law Examination, all developed by NASAA and administered by FINRA.

“Under the Uniform Securities Act, investment adviser representatives register at state level, and most states require a passing score on the Series 65, or the Series 66 alongside the Series 7, before an individual can act in that capacity. Our step-by-step guide on how to become an investment adviser representative covers each stage in full.”

Historical Origins — Blue Sky Laws and the Path to Uniformity

State securities regulation predates federal securities law by more than two decades — Kansas enacted the first state securities statute in 1911, and other states quickly followed with their own investor protection laws designed to prevent fraudulent securities sales within their borders.

These state laws became known collectively as blue sky laws — a term attributed to a judicial opinion describing how speculative securities promoters would sell investors shares in everything including the blue sky itself. By the time Congress enacted the Securities Act of 1933 and the Securities Exchange Act of 1934 in response to the Great Depression and the stock market crash of 1929, every state already had its own securities regulatory framework — and the federal laws were designed to operate alongside rather than preempt the existing state regulatory structure.

The proliferation of fifty separate state securities laws — each with its own definitions, registration requirements, exemptions, and enforcement procedures — created significant compliance burdens for securities firms operating across multiple states and produced inconsistencies in investor protection from state to state.

The Uniform Law Commission responded to this fragmentation by developing the original Uniform Securities Act of 1956 — a comprehensive model act designed to bring a measure of uniformity to state securities regulation while preserving the fundamental principle that states have their own independent authority to regulate securities transactions occurring within their borders.

NASAA — the association of state securities administrators from all fifty states, the District of Columbia, Puerto Rico, the United States Virgin Islands, and the Canadian provinces — subsequently developed amendments and updates to the 1956 Act, incorporating changes necessitated by developments in federal law, market evolution, and accumulated regulatory experience.

The current working version of the Uniform Securities Act incorporates NASAA's amendments and serves as the primary reference for the content of the Series 63, Series 65, and Series 66 examinations.

The Four Principal Regulatory Subjects

The Uniform Securities Act addresses four principal areas of securities regulation — the registration of broker-dealers and agents, the registration of investment advisers and investment adviser representatives, the registration or exemption of securities, and the antifraud provisions that apply universally regardless of registration status.

Broker-dealer and agent registration under Section 201 of the Act requires every broker-dealer transacting securities business within the state and every agent — defined as an individual representing a broker-dealer in effecting securities transactions — to register with the state securities administrator unless they qualify for a specific exemption.

The registration process requires submission of detailed application information through the Central Registration Depository — the CRD system maintained by FINRA — including background information about the applicant, disclosure of any disciplinary history, and satisfaction of minimum financial requirements and bonding obligations specified in Section 202 of the Act.

Unlike an investment adviser, a broker-dealer has no federal covered category under the Uniform Securities Act — a broker-dealer registered with the SEC under the Securities Exchange Act of 1934 and a member of FINRA must still register as a broker-dealer in each state in which it transacts business, unless it falls outside the Act's definition of a broker-dealer, as a firm with no place of business in the state does when it deals there only with issuers, other broker-dealers, banks and other financial institutions or institutional buyers, or with existing customers who do not reside in the state.

The National Securities Markets Improvement Act of 1996 — NSMIA — left that state registration in place and limited instead what a state may demand of a registered broker-dealer: under Section 15(i) of the Securities Exchange Act of 1934, which NSMIA added, no state may establish capital, custody, margin, financial responsibility, recordkeeping, bonding, or financial or operational reporting requirements for broker-dealers that differ from, or are in addition to, the federal requirements, while the states keep their authority to register firms and their agents and to bring enforcement actions for fraud or deceit and for unlawful conduct by brokers and dealers.

Investment adviser and investment adviser representative registration under Section 201 follows a parallel structure — investment advisers must register with either the SEC under the Investment Advisers Act of 1940 or with each state in which they conduct advisory business, depending on their assets under management. In general, investment advisers managing less than one hundred million dollars in assets register with the states — called state-registered or state investment advisers — because Section 203A of the Investment Advisers Act of 1940 bars an adviser with less than twenty-five million dollars that is regulated by its home state, and a mid-sized adviser with between twenty-five and one hundred million dollars that its home state registers and examines, from registering with the SEC, subject to exceptions such as advising a registered investment company.

Under SEC Rule 203A-1, an adviser with at least one hundred million but less than one hundred and ten million dollars of assets under management may, but need not, register with the SEC; at one hundred and ten million dollars or more it registers with the SEC unless an exemption applies; and an SEC-registered adviser need not withdraw its SEC registration unless its assets under management fall below ninety million dollars. Advisers registered with the SEC are called federal covered advisers.

Federal covered advisers are not required to register with state securities administrators but must file a notice — Form ADV Part 1 — with each state in which they have clients or a place of business and pay the applicable state fee.

Investment adviser representatives — the individual persons who represent investment advisers in providing investment advice to clients — must register individually with the state securities administrator, but where they must register depends on the employing firm. A representative of a state-registered adviser must register in a state unless the representative has no place of business there and, during the preceding twelve months, has had no more than five clients there other than the institutional clients the Act lists. A representative of a federal covered adviser registers only in a state where the representative has a place of business, because NSMIA, through Section 203A(b) of the Investment Advisers Act, allows a state to license, register or otherwise qualify the representatives of SEC-registered advisers only if they have a place of business located within that state. This division reflects the states' continuing authority over the individuals who directly interact with retail investors even when the firm itself is federally regulated.

The De Minimis Exemption for Investment Advisers

One of the most frequently tested exemptions in the Series 65 examination context is the de minimis exemption from state investment adviser registration — which provides that an investment adviser with no place of business in a state is exempt from state registration in that state if its only clients in the state are five or fewer retail investors during the preceding twelve-month period.

The de minimis exemption applies only to investment advisers — it does not apply to broker-dealers, which must register in every state where they conduct business regardless of the number of clients. An investment adviser with its principal office in New York that has only three retail clients in California is exempt from California state investment adviser registration under the de minimis exemption — provided it has no office or other place of business in California. If the adviser opens a California office — even a home office — the exemption is lost and state registration is required regardless of the number of clients.

The de minimis exemption does not apply to institutional clients — the five-client threshold counts only retail investors. An investment adviser with one hundred institutional clients in a state and no place of business there remains exempt from state registration if it has no retail clients in that state — but the threshold applies to the retail client count alone.

Securities Registration Under the Uniform Securities Act

The Uniform Securities Act requires that any security offered or sold within a state be registered with the state securities administrator or qualify for an exemption from registration — a requirement that operates independently of and in addition to the SEC registration requirements of the Securities Act of 1933 for public offerings.

Three methods of state securities registration are established under the Uniform Securities Act. Registration by coordination — the most commonly used method for securities simultaneously registered under the Securities Act of 1933 — allows the issuer to register the securities with the state by coordinating the state registration with the federal registration, filing copies of the federal registration materials with the state and having the state registration become effective simultaneously with the federal registration. Registration by qualification — the most comprehensive method — requires the issuer to file detailed information with the state administrator and obtain the administrator's affirmative approval before selling securities in the state, without reference to any federal registration. Registration by filing — available under the NASAA-amended 1956 Act for securities of established issuers that, among other conditions, have actively engaged in business operations in the United States for at least thirty-six consecutive calendar months and have been subject to Section 12 of the Securities Exchange Act of 1934 and filed all material required under Sections 13 and 14 for at least thirty-six calendar months before the federal registration statement is filed — allows registration by filing the relevant federal disclosure documents with the state.

The most important exemptions from state securities registration are the federal covered security exemptions established by NSMIA — securities registered under the Securities Act of 1933 and listed on national securities exchanges, securities of investment companies registered under the Investment Company Act of 1940, and certain securities sold pursuant to Regulation D Rule 506, under which offers and sales are deemed transactions not involving a public offering within Section 4(a)(2) of the Securities Act of 1933, are federal covered securities exempt from state registration requirements. States may require notice filings and fees for federal covered securities but may not impose their own substantive registration requirements — a preemption that dramatically reduced the compliance burden of multistate securities offerings following NSMIA's enactment in 1996.

Stop Orders Against Securities Registrations

The administrator's control over a securities registration does not end when the registration takes effect. Under Section 306 of the 1956 Act, the administrator may issue a stop order denying effectiveness to a registration statement, or suspending or revoking its effectiveness, on finding that the order is in the public interest and that a statutory ground exists. The grounds reach the offering as well as the filing. Besides a registration statement that is incomplete in a material respect or contains a materially false or misleading statement, they include a willful violation of the Act in connection with the offering by the issuer, its insiders or an underwriter, an issuer whose enterprise includes activities that are illegal where performed, an offering that has worked or tended to work a fraud upon purchasers, and an offering made with unreasonable amounts of underwriters' and sellers' discounts, commissions or other compensation, promoters' profits or participation, or options.

Accuracy is tested as of a fixed date. The official comment to Section 306 explains that in a suspension or revocation proceeding the completeness and accuracy of the registration statement are tested as of its effective date, so the fact that a registration statement has become misleading because of developments after it took effect is not a ground for revoking its effectiveness. An administrator who wants the information kept current may require reports as often as quarterly, and a misleading report then becomes a ground. The administrator also may not institute a stop order proceeding against an effective registration statement on the basis of a fact or transaction known to the administrator when the registration statement became effective unless the proceeding is instituted within the next thirty days.

Except for a summary order postponing or suspending effectiveness pending the final determination of a proceeding, no stop order may be entered without appropriate prior notice to the applicant or registrant, the issuer and the person on whose behalf the securities are offered, an opportunity for hearing, and written findings of fact and conclusions of law.

The Antifraud Provisions — Universal Application

Section 101 of the Uniform Securities Act — the antifraud provision — is the broadest and most fundamental provision of the Act, prohibiting fraudulent and deceptive conduct in connection with any securities transaction regardless of whether the security or the person involved is registered, exempt from registration, or subject to any other provision of the Act.

The antifraud provisions apply to every offer and sale of securities within the state — to registered and unregistered securities, to exempt and non-exempt transactions, and to registered and unregistered persons. A securities transaction that is entirely exempt from registration requirements is nonetheless fully subject to the antifraud provisions — exemption from registration does not exempt anyone from the obligation to deal honestly and avoid deceptive practices in connection with securities transactions.

The Uniform Securities Act antifraud provisions prohibit employing any device, scheme, or artifice to defraud — making any untrue statement of a material fact — omitting to state a material fact necessary in order to make the statements made not misleading — and engaging in any act, practice, or course of business that operates as a fraud or deceit. These provisions closely parallel the federal antifraud provisions of Section 17(a) of the Securities Act of 1933 and SEC Rule 10b-5 under the Securities Exchange Act of 1934 — reflecting the intent that state and federal antifraud protection operate in tandem to provide comprehensive coverage across all securities transactions.

Civil Liability to Purchasers

Under Section 410 of the 1956 Act, a person who offers or sells a security in violation of the Act's registration requirements, or by means of an untrue statement of a material fact or an omission of a material fact needed to make the statements made not misleading, is liable to the person buying the security from that person. For a misstatement or omission, liability depends on the buyer not knowing of the untruth or omission, and the seller escapes it only by proving that the seller did not know, and in the exercise of reasonable care could not have known, of it. The official comment to the 2002 Act's counterpart, Section 509, notes that courts have not treated causation or reliance as elements of this cause of action, unlike private actions under Rule 10b-5.

The remedy is rescission. The buyer may sue to recover the consideration paid for the security, together with interest from the date of payment, costs and reasonable attorneys' fees, less any income received on the security, upon tendering the security and that income — or, if the buyer no longer owns the security, damages equal to the amount recoverable upon a tender less the value of the security when the buyer disposed of it, with interest. A seller can cut the suit off with a written offer, made before suit, to refund the consideration paid with interest less income received: a buyer who receives such an offer while still owning the security and fails to accept it within thirty days of receipt may not sue.

Liability extends beyond the seller. Every person who directly or indirectly controls a seller who is liable, every partner, officer or director of that seller, every employee who materially aids in the conduct giving rise to the liability, and every broker-dealer or agent who materially aids in that conduct is liable jointly and severally with, and to the same extent as, the seller, unless able to prove lack of knowledge of the facts giving rise to the liability that reasonable care could not have overcome.

The State Securities Administrator — Authority and Powers

Every state's securities law designates a state securities administrator — the official or agency responsible for administering the Uniform Securities Act within that state. State securities administrators hold broad investigative and enforcement authority under the Act — they may issue subpoenas compelling the production of documents and the testimony of witnesses, conduct examinations of registered persons' books and records, issue cease and desist orders halting ongoing violations, deny or revoke the registration of broker-dealers, agents, investment advisers, and investment adviser representatives, impose civil monetary penalties, refer cases for criminal prosecution, and seek judicial injunctions and other equitable relief.

The state securities administrator is the primary point of contact for investor complaints about broker-dealers, agents, investment advisers, and investment adviser representatives within the state — and state administrators have historically been aggressive enforcement authorities, particularly against retail investment fraud targeting individual investors in their state. NASAA coordinates enforcement efforts among state administrators — sharing information about ongoing investigations, coordinating multistate enforcement actions against firms or individuals operating across multiple states, and maintaining the BrokerCheck alternative database that supplements FINRA's own BrokerCheck system.

Denial, Suspension, Revocation and Withdrawal of Registration

Section 204 of the 1956 Act governs the administrator's power over the registration of broker-dealers, agents, investment advisers and investment adviser representatives. The administrator may by order deny, suspend or revoke a registration, bar or censure a registrant or its officers, directors or partners from employment with a registered broker-dealer or investment adviser, or restrict a registrant's activities, but only on finding both that the order is in the public interest and that the applicant or registrant falls within a listed ground, such as a willful violation of the securities laws, a conviction within the past ten years of a securities-related misdemeanor or of any felony, a court injunction, dishonest or unethical practices in the securities business, or a failure reasonably to supervise agents, adviser representatives or employees.

The Act limits orders based on want of qualification. The administrator may not enter an order solely on the basis of lack of experience if the applicant or registrant is qualified by training or knowledge or both, and must consider that an agent who will work under the supervision of a registered broker-dealer need not have the same qualifications as a broker-dealer, and that an investment adviser representative supervised by a registered investment adviser need not have the same qualifications as an investment adviser.

The administrator may act first and hear the matter afterwards. It may by order summarily postpone or suspend a registration pending the final determination of a proceeding, but must promptly notify the applicant or registrant, of the order, its reasons, and that the matter will be set down for hearing within fifteen days after receipt of a written request; if no hearing is requested or ordered, the order stays in effect until modified or vacated. A withdrawal from registration becomes effective thirty days after the application to withdraw is received unless a revocation or suspension proceeding is pending or is instituted within that time, and even after a withdrawal has automatically become effective the administrator may institute a revocation or suspension proceeding for a willful violation within one year.

The Uniform Securities Act and the Series 63 Series 65 and Series 66 Examinations

The Uniform Securities Act with NASAA amendments is the primary substantive basis for the Series 63 Uniform Securities Agent State Law Examination — which tests candidates' knowledge of state securities law requirements applicable to agents of broker-dealers. The Series 63 consists of sixty-five multiple-choice questions with sixty scored questions, administered over seventy-five minutes, with a passing score of seventy-two percent — forty-three correct answers out of sixty scored questions.

The Series 65 Uniform Investment Adviser Law Examination incorporates state law content based on the Uniform Securities Act — approximately twenty-five to thirty percent of the Series 65 examination covers state securities law including registration requirements for investment advisers and investment adviser representatives, exemptions from registration, the antifraud provisions, and the enforcement powers of state securities administrators.

The Series 66 Uniform Combined State Law Examination combines the content of the Series 63 and the state law portions of the Series 65 into a single examination — qualifying candidates as both securities agents and investment adviser representatives through a single test rather than requiring separate Series 63 and Series 65 examinations. 

Examination Relevance and Key Takeaways

The Uniform Securities Act is the foundational statutory framework tested on the Series 63, Series 65, and Series 66 examinations in the context of state securities regulation, registration requirements, exemptions, antifraud provisions, and administrator authority.

The key points to retain are these.

The Uniform Securities Act is a model state securities law first promulgated by the Uniform Law Commission in 1956 and subsequently amended by NASAA — it serves as the template for state blue sky laws that operate alongside federal securities regulation to form the dual-layer United States securities regulatory system. Kansas enacted the first state securities law in 1911 — all fifty states and the District of Columbia have their own securities statutes based substantially on the Uniform Securities Act framework.

The Act regulates four principal areas — broker-dealer and agent registration, investment adviser and investment adviser representative registration, securities registration and exemption, and antifraud provisions applying universally to all securities transactions regardless of registration status.

Broker-dealers registered with the SEC and members of FINRA still register in each state where they transact business unless they fall outside the Act's definition of a broker-dealer — agents of those broker-dealers must individually register in each state where they conduct business. Investment advisers managing less than one hundred million dollars generally register with state administrators — between one hundred and one hundred and ten million dollars an adviser may choose SEC registration, at one hundred and ten million dollars or more it registers with the SEC as a federal covered adviser and files notice in states where it operates, and once registered with the SEC it need not withdraw unless its assets fall below ninety million dollars.

Investment adviser representatives register individually with the states — a federal covered adviser's representatives only where they have a place of business, a state-registered adviser's representatives also where they serve more than five clients other than institutions. The de minimis exemption from state investment adviser registration applies when the adviser has no place of business in the state and fewer than six retail clients there during the preceding twelve months — this exemption applies to investment advisers only not broker-dealers.

The three methods of state securities registration are coordination — simultaneous with federal registration under the 1933 Act — qualification — state administrator affirmative approval — and filing — available for seasoned reporting issuers. Federal covered securities under NSMIA — exchange-listed securities, registered investment company shares, and certain Regulation D securities — are exempt from state registration requirements though states may require notice filings and fees. The antifraud provisions apply to all securities transactions regardless of registration status — prohibiting fraudulent devices, material misstatements, material omissions, and deceptive practices in connection with any offer or sale of securities within the state.