NASAA Series 63 / 65 / 66 Dump Sheet - State Laws and Regulations - Criminal Penalties (5-5-3 rule)

Sep 25, 2026

Uploaded by Jacob

NASAA Series 63/65/66 dump sheet compiling key securities-law rules on state laws and regulations. Covers criminal penalties for willful violations using the 5-5-3 rule, including statute of limitations, maximum fine, and maximum jail sentence. Summarizes federal covered advisers SEC registration triggers by AUM thresholds and multi-state adviser rules, custody definitions and adviser requirements, offers and sales treatment, civil liabilities for unknowingly violating the law, and federal covered securities and exemptions. Includes how to register securities in a state via notice filing or state registration distinctions.

LanguageEnglish

CategoryExam

FormatPDF

Pages1

Reading Time3 min

AccessFree to download

Criminal penalties (5-5-3 rule)

Federal covered advisers

Custody

Offers & sales

Civil liabilities

Federal covered securities and securities exemptions

Registering securities in a state

NASAA SERIES 63 / 65 / 66 DUMP SHEET State laws and regulations Criminal penalties (5-5-3 rule) | Penalties if willfully violating the law (per violation):
• 5-year statute of limitations
• $5,000 maximum ﬁne
• 3-year maximum jail sentence | | | --- | --- | Federal covered advisers | Eligible for SEC registration:
• $100–$110 million AUM
• Registered in 15 or more states (multi-state adviser rule)
Must register with the SEC:
• More than $110 million AUM
• Advisers to registered investment companies
Must withdraw (return to state registration):
• AUM falls below $90 million | | | --- | --- | Custody | Custody means:
• Holding client funds or securities
• Keeping client funds received by mistake more than 3 business days
• Authority to withdraw from a client’s account Requirements for investment advisers:
• Conﬁrm the state allows custody
• Notify the state administrator on Form ADV
• Place assets with a qualiﬁed custodian
• Send quarterly statements
• Annual surprise audit (ﬁled on Form ADV-E)
• $35,000 minimum net worth (vs. $10,000 for discretion) | | | --- | --- | Offers & sales | Oﬀer: attempt to dispose of, or solicitation of an oﬀer to buy, a security for value
Sale: contract of sale of, contract to sell, or disposition of, a security for value
Considered oﬀers and/or sales:
• Bonus oﬀer of securities
• Gift of assessable stock
• Warrants, rights, derivatives, and convertibles
Not considered oﬀers or sales:
• Bona ﬁde pledges or loans • Stock dividends
• Corporate actions • Gift of non-assessable stock | | | --- | --- | Civil liabilities Liabilities if unknowingly violating the law: • 3-year statute of limitations • No later than 2 years after discovery Right of rescission: written oﬀer to buy the security back • At the original cost, plus interest & legal fees, minus income received • Client has 30 days to accept or reject Federal covered securities Regulated by the SEC, exempt from state registration: • Exchange-listed securities (and equal or senior securities of the same issuer) • Investment company securities • Rule 506 (Regulation D) private placements • Certain federally exempt securities (US government, out-ofstate municipal) Securities exemptions | Exempt securities: government (US, Canadian, national foreign) , bank, insurance, common carrier & utility, federal covered, non-proﬁt, promissory notes, employee beneﬁt plans
Exempt transactions:
• Private placements (oﬀers to 10 or fewer retail investors in 12 months)
• Isolated non-issuer transactions
• Unsolicited non-issuer transactions
• Certain ﬁduciary transactions (executor, sheriﬀ, bankruptcy trustee, guardian, conservator)
• Debt-related transactions (bona ﬁde pledges and loans)
• Transactions between issuers and underwriters
• Institutional transactions
• Oﬀer of pre-organization certiﬁcates (10 or fewer subscribers, no payments) | | | --- | --- | Registering securities in a state Notice ﬁling: federal covered securities only; not a state registration (easiest) Coordination: SEC and state registration at once; interstate securities that aren’t federal covered Qualiﬁcation: state registration only (SEC exempt); intrastate securities (hardest) [achievable.me](achievable.me)

FAQs

What does the 5-5-3 rule specify for criminal penalties under the willful violation standard?

It states a 5-year statute of limitations, a $5,000 maximum fine per violation, and a 3-year maximum jail sentence.

When must an adviser register with the SEC under the federal covered adviser rules?

An adviser must register with the SEC if it has $110 million+ in AUM, advises registered investment companies, or meets the specified SEC-covered criteria.

How is custody defined, and what core adviser requirements apply?

Custody includes holding client funds or securities, retaining funds received by mistake more than 3 business days, or having authority to withdraw from a client’s account. Requirements include confirming state allowance, notifying via Form ADV, using a qualified custodian, providing quarterly statements, conducting an annual surprise audit on Form ADV-E, and meeting minimum net worth thresholds.

Sep 25, 2026

Uploaded by Jacob