9.13 - Legal Jurisdiction of the Administrator
An agent working for a brokerage firm and his client both live in Illinois, and the agent makes an offer to the client by phone while the client is vacationing in California, which he accepts. The client travels to Texas before returning home and sends payment for the security from there. He makes his payment by sending a check from a money-market fund based in Ohio. The Administrators of which of the following states have authority over the sale? Illinois. California. Texas. Ohio. A) I and II. B) II and III. C) II, III and IV. D) I, II, III and IV.
Answer: A Because the offer was made from Illinois to a person in California, the state Administrators of both states have jurisdiction. The state from which payment was mailed and the state in which the checking account or money-market fund is based are irrelevant for the purpose of determining an Administrator's jurisdiction.
An agent is registered with a broker/dealer whose principal office is located in State X, but who also does business in State Y. However, the agent is only licensed in State Y and, confines her business to residents of that state. The Administrator of State X has what kind of authority over this agent? A) Cannot check the records of the agent in state Y, since it is not their jurisdiction. B) Can check the records of the agent in state Y with no prior notification. C) Can check the records of the agent in state Y only with proper prior notification. D) Can only take action against this agent when she is physically present in State X.
Answer: A Even though the broker/dealer is registered in state X, the agent in question is not; she is only registered in state Y. Therefore, the Administrator has no jurisdiction over the activities of this agent in a state other than his own.
An agent in New Hampshire mails an offer to sell securities to clients in New York. Under the Uniform Securities Act, which of the following is (are) TRUE? An offer to sell has been made in New York if a client receives it in New York. An offer to sell has been made in Virginia if a client receives forwarded mail in Virginia. The agent is subject to the statutes of both New Hampshire and New York. A) I and III. B) I only. C) I and II. D) II only.
Answer: A Offers directed to persons in other states by mail are considered to have been made in the other states if received where originally addressed. For clients receiving the offer in New York, an offer to sell has been made there because the mail was received where directed. When mail is forwarded to another state, an offer to sell is not considered to have been made in the state to which the mail was forwarded.
Under which of the following circumstances would the Administrator of this state have jurisdiction? a letter was sent to a client in this state from an agent in another state a mass mailing was made in this state a television broadcast advertising a security was made from this state a radio broadcast advertising a security was made from a neighboring state A) I, II and III. B) I, II, III and IV. C) I and II. D) III and IV.
Answer: A Radio or TV broadcasts made from outside the state do not come under the Administrator's jurisdiction. The letter sent from out of state does because the offer is being made in this state.
An IAR is registered in New York and Vermont. While working in his New York office, he places a call to the cell phone of one of his clients who happens to be on vacation in Ohio. After describing the reasons for a particular stock recommendation, the client asks the agent to call back tomorrow. The agent does so and reaches the client in Indiana. The client decides to purchase 100 shares of the stock. When the client arrives home, he notices that he has already received his stock certificate from the transfer agent located in Illinois. In this case, jurisdiction resides with the Administrator of: New York. Ohio. Indiana. Illinois. A) I, II and III. B) I and IV. C) II and III. D) I, II, III and IV.
Answer: A The Administrator has jurisdiction from the state in which the offer was made (NY), received (OH), and accepted (IN). Mailing of the certificate is of no consequence.
Which of the following is TRUE regarding a state Administrator's authority? A) With certain limited exceptions, Administrator has authority over any transaction made in the state where officiating. B) The Administrator's subpoena power covers that state only where officiating. C) The Administrator may suspend an agent's license based solely on the public good doctrine. D) If a specific securities transaction meets the USA's definition of "exempt transaction", the Administrator does not have the power to void that exemption.
Answer: A With certain limited exceptions, a state Administrator has jurisdiction over securities transactions conducted in the officiating state. The Administrator may issue subpoenas or otherwise conduct inspections of records in states other than where officiating if circumstances warrant. Such inspections may be made if the Administrator deems doing so to be in the public's interest. A person's license can only be suspended when it is in the public interest AND a specific provision of the act or rules has been violated. Only in the case of a transaction involving a federal covered security does the Administrator not have the power to void the exemption.
An investor who resides in New York reads a newspaper ad for advisory services in a newspaper published in New Jersey. More than 80% of the newspaper's circulation is in the state of New York. According to the Uniform Securities Act, an offer has been made in: A) New Jersey and New York. B) neither New Jersey nor New York. C) New Jersey. D) New York.
Answer: B An offer is not made when a newspaper is circulated but not published in the state, or if it is published in the state but has more than 2/3 of its circulation outside of the state.
An agent based in Alabama directs a solicitation to a customer who lives in Connecticut while the customer is temporarily in Indiana. The customer does not accept the offer until he arrives back in Connecticut. According to the Uniform Securities Act, the Administrators of which of the following states have jurisdiction? A) Indiana and Connecticut. B) Alabama, Connecticut, and Indiana. C) Alabama and Connecticut. D) Alabama and Indiana.
Answer: B The Administrator from any state from which an offer is made, directed, or accepted has jurisdiction over the offer.
An Administrator has jurisdiction over an offer to sell securities if it is made in a newspaper published out of state: A) with at least ½ of its circulation in the state. B) with at least 2/3 of its circulation in the state. C) under no circumstances. D) with at least 1/3 of its circulation in the state.
Answer: C A state Administrator never has jurisdiction over a securities offering made in a bona fide newspaper published out of state. However, the Administrator has jurisdiction if the paper is published in his state except where 2/3 or more of the paper's circulation is out of that state.
XYZ Securities, Inc., a FINRA member broker/dealer, is registered in all 50 states. XYZ has its principal office in New York and a branch office in Arizona. If the Utah Administrator wished to examine certain of XYZ's financial records, the Administrator: could do so during normal business hours without prior notice. can only examine those records located in the state of Utah. could ask the New York Administrator to perform the examination. could ask FINRA to perform the examination. A) I and III. B) I and IV. C) II only. D) I, III and IV.
Answer: D If a broker/dealer is registered in his state, the Administrator can examine that firm's books and records during normal business hours without prior notice. To minimize expenses, Administrators usually ask the Administrator of the state in which the broker/dealer has its principal office to ask on their behalf. Alternatively, the Administrator may call on an SRO like FINRA to examine one of its member firms on behalf of the Administrator.
Which of the following is NOT considered a valid receipt of an offer to buy or sell securities in this state under the Uniform Securities Act? A television broadcast transmitted from a neighboring state. A radio broadcast transmitted from in a neighboring state. A newspaper advertisement in a paper published in the state, but which has over 2/3 circulation outside the state. A) I only. B) I and III. C) II and III. D) I, II and III.
Answer: D Offers are not considered to have been made by a radio or television program originating outside the state; bona fide newspapers or magazines published outside the state; bona fide newspapers or magazines published within the state if more than 2/3 of its circulation is outside the state.
