State Registration by Coordination

⚠️ The three state registration methods — where this chapter fits

🔑 Registration by coordination at a glance

State registration typically becomes effective when the SEC declares the federal registration effective.

🔑 Numbers & deadlines

Overview

• Securities sold in more than one state (interstate) that don’t meet the definition of a federal-covered security are subject to registration by coordination.
• 🔑 This registration method involves both the SEC and the relevant state administrators. In other words, the issuer registers the security with federal and state regulators at the same time.
• The National Securities Market Improvement Act of 1996 (NSMIA) drew a clear boundary between federal and state regulations. NSMIA determined that federal rules supersede state rules when both levels regulate the same entity.
• That same idea shows up in registration by coordination: issuers primarily follow SEC registration requirements, which are largely established in the Securities Act of 1933.
• 📌 You may recognize this law from other exams, but the detailed provisions aren’t tested on this material.

The process

• The SEC typically processes registration paperwork in 20 days (the “20-day cooling off period”) and then declares the registration effective if the required documents are complete.
• While the SEC review is happening, the issuer also submits the following to the state administrator:

🔑 What must be filed with the state administrator

Definitions

🔑 Effectiveness

State registration typically becomes effective when the SEC declares the federal registration effective.

Before the state will grant effective registration, state administrators generally require the following:

• ⚠️ As with rules that apply to registered persons, the issuer, underwriter, or anyone connected with the sale of newly registered securities may not imply that the state administrator has approved the security.

Escrow requirements (promotional shares)

• Some securities registered by coordination may be subject to state-enforced escrow requirements.
• The North American Securities Administrators Association (NASAA) maintains a rule regarding promotional shares. These are generally equity shares (stock) issued by smaller companies with weak financials.
• If a security meets the definition of promotional shares, the issuer may be required to hold offering proceeds for a specified period of time.

• This helps prevent an issuer from raising only a small amount and then misusing or disappearing with the funds.
• Once the specified amount is raised, the escrowed funds are released to the issuer.

Duration of registration

• ⚠️ Unlike the registration of persons, a security remains registered for one full year from the effective date.
• There is no renewal required at the end of the calendar year (December 31st).
• Registration continues only if the offering has not sold out.
• In most cases, public offerings last days or weeks, so they don’t extend past one year. However, if shares are still unsold one year after the effective date, the registration will continue.

Key points

Registration by coordination

• SEC (federal) and state registration simultaneously
• Required items to be submitted to the administrator:
  • The security’s prospectus
  • Articles of incorporation
  • Any agreement with underwriters
  • Any indenture or other instrument governing the issuance of the security to be registered
  • Copy of any other information filed with SEC (if requested by state administrator)
  • Consent to service of process
  • Filing fee
• State registration is effective when SEC registration is effective, as long as:
  • State registration paperwork on file at least 10 days
  • No stop orders exist
• Administrator may require proceeds to be placed in escrow for a short period

Sources

Primary/official references for the material in this chapter. Every link was fetched and returned HTTP 200 on 2026-08-15.