Uniform Securities Agent State Law (Series 63) Practice Exam

Which of the following is classified as an exempt security?

1. Corporate bonds issued by new companies

2. Options for securities of publicly traded companies

3. U.S. government securities

4. All forms of derivatives

The correct answer is: U.S. government securities

U.S. government securities are classified as exempt securities because they are issued by the federal government, which carries a low risk of default. Exempt securities are not subject to the same registration requirements as non-exempt securities, which provides a significant advantage for investors seeking lower-risk investment options. U.S. government securities, such as Treasury bonds, bills, and notes, are explicitly recognized as exempt under both federal and state securities laws. In contrast, corporate bonds issued by new companies do not fall into this category because they require registration due to the higher risk associated with new issuers. Options for securities of publicly traded companies do not qualify as exempt securities either, as they also require registration and are subject to regulatory oversight. Lastly, all forms of derivatives are not classified as exempt securities since they can vary widely in nature and risk, and many require registration and reporting to regulators. Thus, the classification of U.S. government securities as exempt is based on their inherent safety and the backing of the federal government.