Exempt Security

Exempt security - An exempt security is a security that is exempt for the Securities Exchange Commission (SEC) or Federal Reserve board rules. Under the SEC, the security is exempt under section 3 of the SECURITIES ACT OF 1933 from all requirements of the act, with the exception of fraud, which is stated in section 17 of the act. However the terms and conditions in the Securities Act of 1933 for the exempt security would not apply to larger companies with 500 and more shareholders. However, a common type of exempt security is a tax-exempt security. A tax-exempt security can also be a municipal bond. The higher the investor's tax bracket the more beneficial a tax-exempt security would become.