Securities RegistrationQuestion 53 of 100
A corporation issues short-term notes to raise working capital. For the notes to fall within the commercial paper exemption, they must generally:
a.Be convertible into common stock
b.Be sold only to individual investors
c.Mature within nine months, be rated in one of the top categories by a nationally recognized rating agency, and be issued in large denominations
d.Be guaranteed by a commercial bank
Explanation
The commercial paper exemption is limited to high-quality, short-term paper: a maturity of nine months or less, a top-tier rating, and denominations large enough that the instruments are bought by institutions rather than small retail investors. Convertibility would give the note an equity feature and take it outside the exemption. Neither a bank guarantee nor a retail-only distribution is part of the test.
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