Rule 500 — qualified purchaser, NSMIA, both tiers, secondaries too

NSMIA section 18(b)(3) lets the Commission define “qualified purchaser”; a sale to a qualified purchaser is a covered security, and states may not impose registration or qualification. They may keep antifraud, notice filings and fees, and they may suspend an offering for failure to file or pay. Rule 500 is that definition, purpose-built for CICs, because section 18(b)(4)(D)’s Regulation A preemption only covers Tier 2 of Regulation A and does not cover a section 28 exemption at all.

Who is a qualified purchaser

In the primary market: a purchaser in a covered transaction under the startup exemption, or in a Rule 300 offering, is a qualified purchaser as to that CIC. In the secondary market: any purchaser from a person other than the issuer, an underwriter or a dealer, if (1) the issuer has satisfied an RCA exemption for that CIC and (2) the issuer remains subject to, and current on, the applicable disclosure/filing or periodic-reporting obligation. Secondary preemption therefore piggybacks on a live RCA status. It is not a permanent federalization of the token.

“Current” — and why Form 1-UC is carved out

Current means all periodic reports, and all required startup amendments, have been filed. Form 1-UC current reports are excluded from the test. The Commission’s reason: unaffiliated holders cannot independently know whether a 1-UC event occurred, so a missed 1-UC should not strip them of preemption. A missed 1-KC or 1-SC, or a missed NOR amendment, does strip them. After Form TR, or after the four-year NOR clock ends, secondary preemption stops for remaining outstanding CICs. If you still have a CIC in the market and you have exited the regime, you are back in the blue-sky soup.

Secondary preemption applies even if some of the same CIC was originally sold under Regulation D, so long as the issuer is now in an RCA exemption and current. That is the seasoning path for a 2024 SAFT book: run a qualifying RCA process, stay current, and the outstanding tokens (if they are CICs) pick up secondary preemption.

• NSMIA §18(b)(3) (qualified purchaser) vs. §18(b)(4)(D) (Reg A Tier 2). This paper uses (b)(3) because (b)(4)(D) cannot reach a section 28 exemption or startup, and cannot reach secondaries.
• CrowdCheck and DealMaker’s Task Force letters are why secondary preemption is in the proposal. Reg A’s missing secondary preemption was their principal operational complaint.
• Alternatives: no preemption; preemption of primaries only; preemption of secondaries only. The Commission drafted the costs of each (multi-state review, thinner liquidity, weaker network effects).

• Secondary preemption that dies at Form TR is a cliff. A token that has not yet separated, whose issuer has hit the four-year NOR wall, falls back into 50-state land. Ask for a wind-down (180-day tail) or for preemption to follow the CIC until Rule 400, not until the exemption clock.
• The 1-UC carve-out is correct for holders and generous to issuers. If you are a state, argue the opposite: a missed hack disclosure should kill preemption. If you are an issuer, defend the carve-out and offer a 1-KC certification of 1-UC compliance instead.
• Notice filings: propose a single-file, fee-capped NASAA form coordinated with Form NOR / 1-CRYPTO Part I XML so “states keep fees” does not become 50 EDGAR-adjacent portals.
• Reg D seasoning path: ask for a note that a Rule 200 NOR covering the same CIC, with current 103 website disclosure, is enough to pick up secondary preemption for previously issued units. Otherwise the SAFT book never clears.