Investment Company and Variable Contracts Products Representative (Series 6)Practice Exam

Which provision of the Act is never exempt, even for exempt securities?

1. Registration provisions

2. Anti-fraud provisions

3. Disclosure provisions

4. Accountability provisions

The correct answer is: Anti-fraud provisions

The anti-fraud provisions are a fundamental aspect of securities regulation that apply universally, regardless of the type of security involved—be it exempt or non-exempt. These provisions are designed to prevent deceptive practices and ensure that investors are protected from fraud in their transactions. In any market activity, both issuers and investors must adhere to these rules to maintain trust and transparency. Even if a security falls under an exemption—meaning it may not need to be registered with regulators or provide certain disclosures—the anti-fraud provisions still hold strong. They prohibit any manipulative or deceptive practices when selling securities, ensuring that all participants in the market act honestly and fairly. The other provisions, while important, can be waived or modified based on the nature of the security, particularly in the case of exempt offerings, but the commitment to preventing fraud remains in force at all times. This universal applicability reinforces the integrity of the securities marketplace.