What are "registration by coordination" and "registration by qualification"?

"Registration by coordination" and "registration by qualification" are two distinct methods for registering securities with state regulatory authorities, and they differ fundamentally in terms of the requirements and processes involved, particularly regarding state review.

Registration by coordination is a method where a company can register its securities simultaneously in multiple states, effectively utilizing information already filed with the SEC. This method is beneficial as it allows an issuer to streamline the registration process when they are also registering the same securities at the federal level. The state reviews the registration after it has been filed with the SEC, usually requiring a registration statement that includes the same information required by federal law.

On the other hand, registration by qualification involves a more thorough review process. This method is often used when a company is not also registering its securities with the SEC or when it is unsure of the acceptance of its offering. Each state conducts an in-depth examination of the registration application, including the company’s financial status and disclosures, which may vary considerably from state to state.

Given this context, the answer correctly identifies the distinction that registration by coordination and registration by qualification are indeed two methods for registering securities that diverge significantly based on the level of state review required.