Series 63 Chapter 3

If an investment adviser representative is engaged in criminal activity while violating a rule under the Uniform Securities Act, but had no knowledge of the rule violated, the maximum penalty that may be imposed is a

$5,000 fine The maximum penalty for criminal violations is a $5,000 fine, 3 years imprisonment, or both. However, no prison sentence can be imposed if the person can prove he had no knowledge of the rule being violated.

If the Administrator has summarily suspended an investment adviser representative's registration, the registrant may request a hearing by written request and the hearing will be granted within

15 days NOT 60 days When an Administrator summarily suspends a registration, the registrant has a right to a hearing if the request is made in writing. The hearing must be granted within 15 days of receipt of the request. Registration of professionals takes place at noon of the 30th day and an appeal for review of an Administrator's order must be filed within 60 days.

A customer determines that he has been sold unregistered, nonexempt securities in a prohibited transaction. In accordance with the USA, he can exercise the right to sue within

2 years from discovery or 3 years from occurrence, whichever is sooner The civil liabilities provisions of the Uniform Securities Act provide for a statute of limitations equal to the sooner of 2 years from the date of discovery or 3 years from the date of the violation.

The Uniform Securities Act requires that an administrative order appeal must be requested within how many days after the order has been entered?

60 days Any person who receives an order from the Administrator can petition the court to change or set aside the order, but an appeal must be filed within 60 days after the order was entered.

Under the Uniform Securities Act, which of the following is an offer or a sale?

A gift of stock given as a bonus with a purchase of a parcel of real estate NOT A gift of stock from a mother to a son A gift of securities given as a bonus for any purchase is considered part of the purchase. Stock splits, bona fide gifts, and bona fide pledges or loans made with no purpose of evading the act are not considered sales.

Under the Uniform Securities Act, which of the following statements is TRUE regarding civil liability of investment advisers and broker-dealers?

A lawsuit against a broker-dealer or adviser can be avoided if restitution, costs, and interest are paid to a client. Do not confuse the statute of limitations for criminal prosecution (5 years) with the statute of limitations for civil liability (3 years from the date of the event or 2 years from discovery, whichever occurs first). Since civil liability under the act is limited to restitution, costs, and reasonable interest, a lawsuit could be avoided by a return of the investor's funds plus interest. It is only when the offer is rejected within the first 30 days that the client retains the right to file a suit. Only criminal cases can lead to a prison sentence; that is not an option with civil cases.

Which of the following statements is TRUE?

An Administrator may, at the request of a registrant, hold hearings in private. An Administrator has the discretion to hold hearings in private. A registrant cannot demand that a hearing be held in private. Administrative hearings are administrative actions, and are conducted by the Administrator, not the courts.

Which of the following accurately describes a cease and desist order as authorized by the USA?

An order by the Administrator to refrain from a practice of business believed by that Administrator to be unfair A cease and desist order is a directive from an administrative agency to immediately stop a particular action. The order can come from a federal, state, or judicial body; it is not exclusive to any single body. However, because this question is referring to the Uniform Securities Act, we focus on the actions of the Administrator, not a federal agency. Administrators may issue cease and desist orders with or without a hearing. Courts issue injunctions, usually when the cease and desist order is ignored. Brokerage houses cannot issue cease and desist orders to each other.

An agent works in Buffalo and is registered in New York and Ohio. If the agent contacts a retail client in Ohio recommending the purchase of an unregistered non-exempt security, jurisdiction over this violation of the Uniform Securities Act would lie with the Administrator(s) of

Both New York and Ohio NOT Neither state until a transaction takes place This recommendation is considered an offer and no offer of a security may be made in a state unless the securities is exempt (this one isn't), the transaction is exempt (this one isn't because it is solicited), or the security is registered (this one isn't). Administrators have jurisdiction over offers made in the originating state (New York), the state to which the offer is directed (Ohio), and the state in which the offer is accepted (the question doesn't tell us if it ever was, but that is not necessary because the offer on its own is in violation—we don't need a sale).

Under the Uniform Securities Act, an offer to sell would NOT include stock acquired through a merger the issuance of warrants or convertible securities the issuance of stock rights to existing shareholders

I ONLY An offer to sell is any activity in an effort to dispose of a security for value. The issuance of warrants or convertible securities to anyone or stock rights to existing shareholders is considered an offer to sell the underlying security because, unlike stock dividends, mergers, and bona fide loans, they involve the payment of money to acquire the stock, thereby making them an offer to sell.

Under which of the following circumstances can an Administrator initiate a suspension or revocation proceeding against a broker-dealer registered in the state? On discovery that the broker-dealer's license had been suspended in another state On the conviction of a violation of the Securities Exchange Act of 1934 Two years after the withdrawal of registration by the broker-dealer On the basis of facts known by the Administrator at the time of the broker-dealer's initial registration

I and II An Administrator may initiate suspension proceedings against a broker-dealer on discovering that its registration has been suspended in another state and on conviction of a violation of the Securities Exchange Act of 1934. The Administrator may not initiate revocation proceedings against a broker-dealer later than one year after the broker-dealer has withdrawn its registration. The Administrator may not suspend or revoke a broker-dealer's registration at a subsequent time on the basis of facts known by the Administrator at the time of the initial application.

Under the Uniform Securities Act, the Administrator may deny or revoke a registration if an agent submits an incomplete application willfully violates a provision of the Act has no prior sales experience was convicted of a non-securities related misdemeanor 4 years ago in another state. That crime, however, is a felony in this state

I and II Filing an incomplete application or willfully violating a provision of the Uniform Securities Act are reasons for denial or revocation of an agent's registration. Lack of experience itself, is not a cause and the Administrator can only judge based on what is on the applicant's record - in this case a misdemeanor.

Which of the following statements describes the powers of the Administrator over the issuance of orders? A final order may be appealed in the appropriate court within 60 days of the order being issued. Appeal of a final order will act as a stay of the order, unless a court of competent jurisdiction rules to the contrary. No final order may be issued without the opportunity for a hearing. Final orders must receive approval from the state legislature.

I and III Any final order of the Administrator may be appealed within 60 days of the order. The appeal does not act as a stay of the order. Only a court of competent jurisdiction may issue a stay of the order. Because the final order is similar to passing sentence, an opportunity for a hearing must be granted. The Administrator's orders are not related to the state legislature.

An agent mistakenly sold an unregistered, nonexempt security to a customer. Which of the following actions should the broker-dealer take? Offer to buy the security back from the customer Ask the customer to sign a customer agreement Register the stock by qualification Offer to pay interest at an annual rate determined by the Administrator, less income paid, from the date the security was purchased

I and IV In the case of an agent who mistakenly sells an unregistered, nonexempt security, the broker-dealer should offer to buy back the security from the customer and pay the customer interest on the amount invested in the security for the period from the original purchase to the resale back to the firm, minus any income or profit realized by the client on the security. This is known as the right of rescission.

Which of the following is considered a sale of securities under the Uniform Securities Act? Redemption of mutual funds shares worth $10,000 Dividends of common stock for which no consideration was given for the dividends With the approval of the board of directors, an exchange of common stock for the stock in another company under a merger Disposition of stock for which cash consideration is received

I and IV Redemption of mutual fund shares is always treated as a sale by the redeeming shareholder. The exchange of securities in a merger is not considered a sale under the act. Any disposition (liquidation) of securities that involves cash consideration, or in which the shareholder has a choice of cash or securities, is a sale.

A fraudulent transaction was initiated by an agent in Indiana by contacting a client residing in Iowa. After evaluating the offer, the client agreed to purchase the recommended security while vacationing in Florida. Which Administrator(s) has (have) jurisdiction? The Indiana Administrator The Iowa Administrator The Florida Administrator

I, II and III Activities that originate in a state, are directed into a state, or are accepted in a state fall under the jurisdiction of the Administrator of each of those states.

Disciplinary proceedings under the Uniform Securities Act require the Administrator to provide which of the following? An opportunity for a hearing Written findings of facts and conclusions of law Appropriate prior notice

I, II and III In the event of a disciplinary action, an Administrator must provide appropriate prior notice, an opportunity for a hearing, and written findings of facts and conclusions of law. Even if an order is issued summarily (made effective upon issue without prior notice), a registrant must be notified upon issue of the order and must be given the opportunity to request a hearing.

An Administrator may summarily suspend a registration pending final determination of proceedings under the USA. However, the Administrator may NOT enter a final order without appropriate prior notice to the registrant an opportunity for a hearing findings of fact and conclusions of law prior written acknowledgment of the registrant

I, II and III Prior to the entry of a final order, the Administrator must provide appropriate prior notice to the registrant, provide the opportunity for a hearing, and present findings of fact and conclusions of law. A registrant is not required to provide written acknowledgement before an order is issued.

Which of the following statements regarding a cease and desist order are TRUE? It is an order to stop a specified activity immediately. If the registered agent continues to violate the statute, the registered agent may become the subject of a court issued injunction. It may be issued by the state Administrator.

I, II and III The Administrator is empowered to issue cease and desist orders that require the immediate halt of a specific activity. If the agent fails to stop engaging in the activity, the Administrator may seek an injunction from a court of competent jurisdiction.

Under the Uniform Securities Act, an offer and sale does NOT exist if it is the result of a class vote by stockholders regarding a merger or consolidation a bona fide pledge or loan an act incident to a judicially approved reorganization in which a security is issued in exchange for one or more outstanding shares a gift of nonassessable securities

I, II, III, and IV NOT I, II, and III The Uniform Securities Act specifically excludes all four choices from the definition of an offer and a sale. SO gift of non-assesable securities is NOT an offer or sale

Anyone who violates the antifraud registration requirements of the act is liable for criminal penalties administrative sanctions, even for exempt securities civil liabilities injunctions

I, II, III, and IV Persons who violate the antifraud provisions of the Uniform Securities Act face injunctions, administrative sanctions, and criminal and civil penalties.

The Administrator may impose disciplinary action against a registrant when the registrant has violated the provisions of federal securities law engaged in unethical practices, even if no law was broken failed to properly supervise an employee who committed prohibited practices as defined by the act failed to lend money to a very good client

I, II, and III Disciplinary action may be imposed by a state Administrator for violations of federal securities regulations, improper supervision, and unethical practices committed, whether or not a law was broken. Even in those few cases where a broker-dealer or investment adviser is permitted to lend money to a client, there is never a case where they are obligated to do so.

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

I, II, and III NOT I, II, III, and IV 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. SO Mailing DOES NOT MATTER

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 from another state to residents 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

I, II, and III 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. Note that the TV broadcast is from a station in this state so the Administrator of this state has jurisdiction.

The definition of "offer" (offer to sell) includes which of the following? An attempt to dispose of a security for value A solicitation of an offer to buy an interest in a security for value The actual sale of a security for value An offer to dispose of a security for value

I, II, and IV NOT I and IV The term "offer" (or offer to sell) is any activity in an effort to dispose of a security for value, such as the offer to sell or the solicitation of an offer to buy a security. The term "sale" or "sell" includes every contract of sale, contract to sell, or any disposition of a security for value.

ABC Securities is a broker-dealer registered with the SEC and domiciled in State X. ABC Securities would not be defined as a broker-dealer in State Y under the Uniform Securities Act if it had no offices in State Y and its only clients were insurance companies it had contact with fewer than 6 State Y residents in any 12-month period its only offer to State Y residents was through radio advertisements originating in State X but received in State Y it occasionally engaged in firm commitment underwriting with issuers based in State Y

I, III and IV NOT I and II A broker-dealer with no office in the state is not defined as a broker-dealer in that state if its only business is with institutions, other broker-dealers, and issuers when engaged in underwriting their securities. When a radio or TV broadcast originating in one state is received in another state, it is only considered to be an offer in the state of origination, in this case, State X. Unlike investment advisers, there is no de minimis for broker-dealers. NO DEMINIMIS FOR BROKER DEALERS

No person may be imprisoned

IF they had no knowledge of the rule or order they were violating.

Nobody Walks Motor Company, a licensed automobile dealer, is running a promotion offering anyone who purchases a car over the weekend to receive a $1,000 corporate bond at no additional cost. Under the Uniform Securities Act, in order to make this offer

Nobody Walks Motor Company must be registered as a broker-dealer in the state The USA states that "any security given or delivered with, or as a bonus on account of, any purchase of securities or any other thing is considered to constitute part of the subject of the purchase and to have been offered and sold for value". Therefore, Nobody Walks Motor Company would have to be registered as a broker-dealer in this state.

Under the Uniform Securities Act, the Administrator has the power to deny, suspend, or revoke the registration of an issue if it is in the public interest and the issuer discloses in the prospectus that there is virtually no chance that the company's business model will be successful and investors should anticipate losing their entire investment the Administrator of another state has revoked the issue's registration an officer of the registrant has been convicted of a securities related crime the prospectus contains misstatements of nonmaterial information

II and III If the Administrator of another state has revoked an issue's registration, the USA considers that just cause for denial in this state. Conviction of an officer of the issuer for a crime related to the securities industry will invariably lead to denial or revocation. Disclosure that the company is not expected to be successful is not a cause for denial; all that is required is full disclosure. Misstatements of material information would be cause for action by the Administrator, but nonmaterial, by definition, does not impact an investor's decision-making process.

Which of the following constitutes an offer or sale of stock? Solicitation of a tender offer by a corporation Gift of assessable stock Purchase of shares through the exercise of a warrant Exchange of shares in a corporate reorganization, such as a merger

II and III NOT I and II A purported gift of assessable stock is considered to involve and an offer and sale under the USA because the corporation that issues assessable stock can bill shareholders for cash representing the par value shortfall at a future date. Upon the exercise of a warrant, the holder of the warrant purchases stock and the issuing corporation sells the stock. Under the Uniform Securities Act, the solicitation of tender offers by corporations and exchange of shares in corporate reorganizations are not sales.

Under the Uniform Securities Act, which of the following statements regarding investigations conducted by the Administrator is TRUE? Information regarding violations must be kept confidential. Investigations may be conducted across state lines. The Administrator may obtain a court order to have a receiver appointed over a violator's assets.

II and III The Administrator is not restricted to his state's boundaries. If appropriate, the Administrator may apply to a court of competent jurisdiction to have a receiver appointed over the assets of a suspected violator. The Administrator is empowered to publish information regarding violations.

Which of the following would subject an agent to a denial of registration? An arrest for fraudulent behavior in selling securities to an insurance company 2 years ago Conviction of a securities-related misdemeanor eight years ago Losing a civil lawsuit three years ago that related to the agent's actions as a landlord Failure to pay filing fees

II and IV Conviction, not merely an arrest, for a misdemeanor involving securities within the past ten years, and failure to pay filing fees are grounds for denial. Loss of a civil suit not related to the securities industry is not a cause for denial to an agent or IAR.

A registered investment adviser has been investigated by the Administrator for fraudulent misrepresentations purportedly made to several clients. If the IA is found to have been in violation of the Uniform Securities Act, this may result in a $10,000 fine per violation a receiver being appointed over the adviser's assets a prison term of 5 years per violation the requirement that the investment adviser make restitution to the victims

II and IV The Administrator may appoint a receiver over the investment adviser's assets and require the IA to make restitution to the victim. The maximum fine for a violation of the USA is $5,000 and the maximum prison term is 3 years.

Applies to persons who sell or offer to sell IF

ORIGINATED in Administrator's state DIRECTED to administrator's state ACCEPTED in administrator's state

Administrator MAY cooperate with other agencies

OTHER States FINRA, SEC and so forth

Broadcast and Publishing Exception to Jurisdiction

Offer not considered made in state IF received through TELEVISION, RADIO BROADCAST, INTERNET OR NEWSPAPERS OUTSIDE STATE Bona fide newspaper or periodical published inside state but has had more than two-thirds of its circulation outside this state during the past twelve months

According to the Uniform Securities Act (USA), which of the following would be the most appropriate action by a broker-dealer following the discovery of an inadvertent sale of an unregistered, nonexempt security?

Offering to buy back the security from the customer under a rescission agreement authorized by the Uniform Securities Act The right of rescission is the right of the buyer to recover the purchase price and interest, less income received on the security, resulting from an illegal sale of securities. When offered by the broker-dealer, no court costs or attorney fees are involved.The agent may not ask the customer to sign a customer agreement that releases the agent. Registration by notice filing (or any other method) is not part of the rescission process. A security cannot be registered retroactively.

Unless Acting Summarily, NO final order may be entered without

Prior Notice Opportunity for a hearing Written findings of fact and conclusions of law

Under the Uniform Securities Act, what remedy does a client have against a firm that has sold him an unregistered non-exempt security?

Request rescission NOT Criminal proceedings In a civil matter like this, the first step the client should pursue is requesting rescission from the seller. Arbitration and mediation are FINRA terms that are not found in the USA and this would certainly not be a criminal act.

Under which of the following circumstances may an Administrator revoke an adviser's registration?

The adviser has been convicted of a nonsecurities-related felony. If an adviser committed a felony or participated in unethical business practices, its registration will be revoked, not canceled. An adviser's registration may be canceled if the adviser is found to be mentally incompetent, cannot be located, or is no longer in business. The difference between canceling and revoking a registration is subtle; cancellation is not punitive while revocation involves some sort of wrongdoing.

Under the Uniform Securities Act, which of the following is NOT a reason for canceling an agent's registration?

The agent has engaged in an unethical business practice The other choices are causes for cancellation, which is not intended to be punitive. Engaging in unethical business practices is a cause for disciplinary action by the Administrator, court-imposed penalties, criminal prosecution, and civil legal remedies.

Under the Uniform Securities Act, which of the following would NOT be an appropriate cause for an agent's registration to be canceled by the Administrator?

The agent is found by a court to have violated a securities statute. The key word is canceled. The Administrator would cancel an agent's registration in the event of death or mental incompetence of the registrant. Failure to locate an agent, such as mail being returned without a forwarding address, is also a cause for cancellation. Cancellation carries no connotation of wrongdoing; for violations, the appropriate action is revocation.

If an agent unknowingly sells an unregistered, nonexempt security and discovers the error afterward, what action is most appropriate?

The agent should notify the appropriate supervisor who then, on behalf of the firm, will offer (in writing) to repurchase the security and pay a reasonable rate of interest minus any income derived from the security. The broker-dealer may offer to rescind the trade by offering (in writing) to repurchase the security and pay a reasonable rate of interest minus any income derived from the security. An agent may not suspend provisions of the USA whether the client agrees or not.

Which of the following would be included in the Uniform Securities Act's definition of a "sale"?

Transfers, for value, of unit trusts to a nontaxable organization NOT Donation of interests in rights, warrants, or options on a nonexempt security For a security to be sold, it must be exchanged for value. Fixed annuities and precious metals are not securities, so no security sale took place. Donating a security does not qualify as a sale. SO has to be EXCHANGED FOR VALUE FOR A SECURITY TO BE SOLD

An Administrator has jurisdiction over an offer to sell securities if it is made in a newspaper published out of state

Under no circumstances NOT with at least two-thirds of its circulation in the state 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 two-thirds or more of the paper's circulation is out of that state GOT the wording confused here

As defined in the Uniform Securities Act, the term sale or sell would include

an investor using a cash dividend to automatically purchase additional shares of the issuer NOT a gift of nonassessable stock Sale or sell includes every contract to sell or dispose of a security for value. When the cash from a dividend is used to purchase additional shares, value is being exchanged. This is unlike the pledge of stock, where ownership does not change hands, or the receipt of a stock dividend, where no consideration is exchanged.

Under the Uniform Securities Act, violations of the act may result in all of the following EXCEPT

an arrest being made by the Administrator The Administrator has the power to impose or ask a court to impose any of the items shown, but does not have the authority to arrest anyone.

As defined in the Uniform Securities Act, the term "offer" or "offer to sell" includes all of the following EXCEPT

a loan with a stated interest rate payable upon demand A loan is not a sale of a security for value and is explicitly excluded from the definition of offer or offer to sell. Although a stock dividend is normally excluded from the terms, "offer" and "sale", when additional payment is required, we now have an offer that must be accepted before there is a sale. An offer of a convertible bond or warrant is an offer of both the bond or warrant as well as the underlying stock. It is only a sale when the offer is accepted. The USA defines a purported gift of assessable stock as both an offer and a sale.

The Uniform Securities Act does NOT grant the Administrator the authority to commence an action against a broker-dealer registered in her state based upon

a shareholder, with no management role in the broker-dealer, being unable meet his financial obligations as they come due NOT discovering the firm has liabilities that exceed its assets An Administrator cannot bring an action against a broker-dealer organized as a corporation because one of its shareholders is financially unstable. Even if the individual had a management role in the BD's operations, it would be unlikely the Administrator would take action against the firm, only the individual. Violation of another state's securities laws within the past 10 years by the president of the firm might be cause for action against a broker-dealer; so is insolvency of the firm, defined as having liabilities in excess of one's assets or the inability to meet financial obligations as they come due. Most actions begin with suspicion of wrongdoing; that is why the Administrator has the power to investigate and subpoena witnesses.

You inform a customer that you are not allowed to solicit an order for a stock but will accept that customer's buy order if placed. This is

an offer to sell NOT an offer to sell only if it is accepted Under the Uniform Securities Act, the term "offer" is the solicitation of an offer. In this example, the agent is soliciting an offer from the customer to buy a security. A solicitation is considered to have occurred even if the customer fails to act on the solicitation.

Under the Uniform Securities Act, willful violation of the act by an agent could NOT subject the agent to

arbitration There is no arbitration procedure in the Uniform Securities Act such as exists with FINRA. Persons who are convicted of violating securities laws may find themselves subject to criminal penalties, civil liabilities, and suspension, denial, or revocation of registration.

Offer and offer to sell

attempt to dispose of a security--offer to sell solicitation of any offer to buy warrant, right, or convertible is an offer of the other security assessable versus non-assessable stock

Sale or sell

disposition of a security for value bonus given with the purchase of security or non-security items a purported gift of assessable stock is considered to involve an offer and sale does NOT include stock dividend or stock split if stockholders give nothing of value Does NOT include stock received as a result of a merger or consolidation pledge or loan, such as a broker's loan of securities to customer, is NOT a sale

If a car dealer offers $1,000 bonds as a bonus for the purchase of cars, the car dealer is

engaging in the offering for sale of a security According to the Uniform Securities Act, offering securities as a bonus on the purchase of another thing for value, such as a car, constitutes an offer of securities. For the purposes of the Uniform Securities Act, the dealers are offering securities and are subject to the provisions of the act. The practice is not fraudulent, but registration as a broker-dealer would be required.

It is a violation of the Uniform Securities Act if an agent

files a fraudulent application It is a violation of the Uniform Securities Act to file a fraudulent or misleading application for registration as a securities industry professional (agent, broker-dealer, or investment adviser). An agent may always make material representation in the sale of a security; it is a material misrepresentation that is not permitted. An unregistered security may be sold in an exempt transaction and an exempt security does not need registration.

Buzzy Rogers, an agent with the brokerage firm of Speedy Executions, Inc. (SEI), has just received notice from his supervisor that a final order has come down from the Administrator of State Z suspending his agent's registration for 6 months. Buzzy's options would include

filing an appeal in the appropriate state court within 60 days of the date of the order Any person aggrieved by a final order of the Administrator may obtain a review of the order in the appropriate court by filing in court, within 60 days after the entry of the order, a written petition appealing the order. The SEC has nothing to do with the Administrator's decision and the Administrator would reject any attempt to register Buzzy with a different BD while he is suspended.

Criminal penalties for violations of the Uniform Securities Act include

fines of up to $5,000 and/or imprisonment for up to 3 years Under the Uniform Securities Act, criminal penalties can include fines for up to $5,000 or imprisonment for up to 3 years, or both. No person, however, may be imprisoned for violation if he proves that he had no knowledge of the rule or order, and no indictment can be returned later than 5 years after the alleged violation. Remember the distinction between criminal penalties and civil liability.

An Administrator may deny or suspend a registration in all of the following situations EXCEPT

if the applicant is not qualified on the basis of experience The Administrator may restrict a registration on the basis of lack of training and knowledge, but not for a lack of experience alone. The Administrator may deny a registration if the applicant was convicted of a misdemeanor involving securities within the last 10 years. The Administrator may deny a registration if the applicant has been the subject of an adverse order entered by the Administrator of another state within the past 10 years. Registrations may be suspended if agents or investment adviser representatives are not properly supervised.

Under the Uniform Securities Act, all of the following statements regarding a broker-dealer withdrawing its registration are true EXCEPT

it prevents the broker-dealer from re-registration in the future If a broker-dealer withdraws its registration, it retains the right to re-register at some future date. The USA provides for a 30-day withdrawal period.

A client of a broker-dealer files a civil suit claiming damages for sale of an unregistered security. During the proceedings, the client suffers a fatal stroke. The suit

is continued by the deceased's executor Death of a party to a suit does not end the suit. Unless the account was specified as a joint account with rights of survivorship, the executor of the deceased's estate will continue the suit.

Under the Uniform Securities Act, a state securities Administrator who believes that a registered investment adviser representative is about to violate a provision of the act would initially

issue a cease and desist order The Administrator would initiate action by issuing a cease and desist order. If the registered investment adviser representative continues to pursue activities that result in a violation of the USA, the Administrator may seek a court injunction to prevent the abuse.

The Administrator has authority to

issue a cease and desist order with or without a hearing The Administrator may issue a cease and desist order with or without a hearing. It is the stop order that requires a hearing. A security traded on the NYSE is federal covered. Think for a moment about what that means in terms of state registration. It means that, as a federal covered security, it is exempt from registration in any state. Therefore, regardless of the CEO's criminal activity, how can the Administrator suspend a registration that doesn't exist? The SEC has the power to do that because NYSE issues are registered with them, but not on the state level. Although the Administrator can do many things, the power to arrest someone is not one of them. If a person refuses to obey a subpoena, the Administrator can apply to the appropriate court. If the court order is ignored, that becomes contempt of court and the court can then issue a warrant for the person's arrest.

The Administrator of a state's securities department strongly believes that the registration statement for a security contains a substantial amount of misleading information and that investing in the security is likely to cause immediate and egregious harm to its investors. Under the following circumstances, the Administrator may

issue a stop order to deny or revoke the registration statement, but must provide the applicant with the opportunity for a hearing NOT revoke the registration statement, denying the applicant a hearing for an unlimited amount of time The Administrator may deny or revoke the registration statement but must provide the applicant with an opportunity for a hearing. In addition, the Administrator must give appropriate prior notice to the applicant or registrant, the issuer, and the person on whose behalf the securities are to be or have been offered, and present written findings of fact and conclusions of law.

​Fusion Financial is a broker-dealer registered in States A, B and C with its home office in State B. A complaint is filed against the firm by a client who resides in State A. Under the powers granted under the Uniform Securities Act, the Administrator of State B could do all of the following EXCEPT

issue an injunction against Fusion Financial ​​An Administrator has the power to gather evidence both within and outside of the home state as well as subpoena evidence and witnesses in any state.​ Only the courts can issue an injunction.​

The Uniform Securities Act does not contain bonding requirements for

issuers NOT state-registered investment advisers YOU KNEW THAT Securities professionals, other than investment adviser representatives, may be required to post a surety bond. That requirement is not placed upon issuers of securities.

Under the Uniform Securities Act, the Administrator may

make rules, orders, and forms the Administrator considers necessary to carry out the provisions of the act The Administrator has power to make, amend, and rescind such rules, forms, and orders it has issued as necessary to carry out the provisions of the act. The state Administrator may not waive provisions of the act. ADMIN MAY NOT WAIVE PROVISIONS OF THE USA

An applicant for registration as an investment adviser discloses on its application to the Administrator that it plans to use palm readers to help determine which investments are most suitable for their clients. Under the Uniform Securities Act, the Administrator

may only justify denial for reasons listed in the Uniform Securities Act NOT is empowered to deny this application for just cause A denial of registration must be based on the concept of law. There are stated reasons for denial, such as felony convictions, outstanding injunctions, and insolvency. Where in the USA does it say an adviser can't use palm readers, a ouija board, or a Magic 8 Ball? Although disclosure of methods of analysis is required, the Administrator is not empowered to pass judgment on the merits of those methods. The USA does state that the Administrator is empowered to "condition a particular applicant's registration as a broker-dealer upon his not transacting business as an investment adviser if the Administrator finds that he is not qualified as an investment adviser." But, nowhere in this question does it indicate that the applicant is, or is applying for, registration as a broker-dealer.

Under the Uniform Securities Act, a civil suit to recover damages may not be brought by an advisory client if

more than 2 years ago, the client realized the improper advice was rendered, but has now decided to take action The statute of limitations for civil cases is two years after discovery or three years after the event, whichever is sooner. The death of neither the investment adviser nor the client removes a cause of action for civil liability, and clients may not waive a securities professional's compliance with the rules. Any client, institutional or retail, has the right to sue for damages.

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

neither New Jersey nor New York NOT New York 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 two-thirds of its circulation outside of the state.

Among the powers granted to the Administrator under the Uniform Securities Act is the power to

subpoena witnesses or documents When conducting an investigation, the Administrator may gather evidence by issuing a subpoena to witnesses. Documents may also be the subject of a subpoena. Lack of experience in itself is not a justification for denial of registration. Although the Administrator will generally refer a case to the proper legal authorities for criminal action, many states do permit the Administrator to initiate criminal proceedings. This is an example of a test question where you have to pick the universally correct question. The USA specifically states that the Administrator has the power to issue subpoenas - it is silent on the issue of the Administrator's power to take criminal action.

Under the Uniform Securities Act, all of the following could be cause for disciplinary review action by the state securities Administrator EXCEPT

the ABC Advisory Group, a registered investment adviser, employs several investment adviser representatives as independent contractors NOT Ed is suspended from conducting business in the securities industry for a period of 6 months by FINRA Investment advisers may employ investment adviser representatives as independent contractors. Even though the Administrator's power to deny a registration is limited to convictions within the past 10 years, being charged with, or any conviction of a felony or securities-related misdemeanor must be disclosed. Similarly, failing to disclose a bankruptcy filing is cause for disciplinary action on the part of the Administrator. Administrators are sensitive to actions by other industry regulators so a suspension by FINRA (may say NASD on your exam) could also lead to taking action.

The Administrator could deny or revoke the registration of a broker-dealer if

the CEO has intentionally failed to file advertising material with the Administrator One of the causes for denial or revocation is a willful violation of the USA and failing to file advertising meets that criteria. You must know your calendar—125 months is longer than 10 years ago.

In order for the Administrator to suspend an agent's registration, compliance with the requirements of the Uniform Securities Act would NOT require that

the agent receives court-appointed defense counsel if she can't afford her own The Administrator may by order summarily postpone or suspend registration, pending final determination of any proceeding under the USA. The hearing is not in a formal court so there is no court to appoint defense counsel. Upon the entry of the order, the Administrator shall promptly notify the applicant or registrant, as well as the employer or prospective employer, if the applicant or registrant is an agent or investment adviser representative, that it has been entered and of the reasons therefor and that within fifteen days after the receipt of a written request, the matter will be set down for hearing. Since the law states that the employer will be notified once the action commences, it should be obvious that once the suspension order becomes final, the employer will be notified.

There are many reasons why the Administrator might deny an application for registration as an agent. It is unlikely, however, that the application would be denied if

the applicant has filed a complete application In order to register, it is required that your application is complete; filing of an incomplete one would be cause for denial. A record of any felony conviction or misdemeanor involving securities fraud during the past 10 years is sufficient grounds for the Administrator to deny an application for registration in the securities industry. Insolvency is also grounds for denial.

Under the Uniform Securities Act, Administrators of all of the following states have jurisdiction EXCEPT

the state from which payment for the purchase of securities was made The state from which payment is made is not relevant in determining whether the Administrator of that state has jurisdiction.

When the Administrator issues a cease and desist order,

the subject of the order must promptly put a halt to the specified activity When you receive a cease and desist order from the Administrator, it means just what it says—you are to cease doing whatever it is that is the subject of the order and desist from doing it in the future. Cease and desist orders may be issued with or without a prior hearing against the person or persons engaged in the prohibited activities, directing them to cease and desist from further illegal activity.

The issuance of a stop order by a state securities Administrator requires

the subject of the stop order be given an opportunity for a hearing The subject of a stop order must be given the opportunity for hearing. As long as the stop order is in effect, the security subject to the order may not be sold to the public or the proscribed activity may not continue. Stop orders do not require an injunction by a court and the Administrator does not have authority to issue criminal charges.

Section 410 of the Uniform Securities Act deals with civil liabilities and rights of recovery for injured parties. Under that section, a person who has been impacted by a sale made in violation of the Act would not be entitled to receive

treble damages Unlike some federal laws, there is no provision in the USA for the payment of treble (triple) damages for a civil suit. Under the right of rescission, the client is entitled to receive the original sum invested, plus interest (less any income received). If the security has already been sold, the legal term that applies in this case is "liquidated damages".

Under the Uniform Securities Act, a client may sue an agent

unless the agent's broker-dealer offers to return the client's purchase price plus interest NOT for up to 5 years from the date of the violation If the agent's broker-dealer offers rescission to the client, the client generally will not initiate a suit because there is nothing to be gained beyond what will be received through rescission. Five years is the statute of limitations for criminal activity and this is civil.

An Administrator may initiate a suspension or revocation proceeding against a broker-dealer registered in his state

upon discovery that the broker-dealer's license had been suspended in another state NOT upon discovery that an agent of the broker-dealer is convicted of a felony violation involving securities fraud Suspension (or revocation) of a broker-dealer's registration in another state is adequate cause for this state's Administrator to initiate the process to suspend the broker-dealer's registration in his state. A felony committed by an agent of the broker-dealer is not usually cause for the Administrator to initiate a proceeding against the broker-dealer. It is only when the question states that the individual is an officer, director, or partner of the firm, or the agent's actions are due to failure to supervise, that action against the firm will generally commence. The Administrator maintains jurisdiction over a license that has been withdrawn for a period of 1 year after the effective date of the withdrawal (it is FINRA who maintains jurisdiction for 2 years). It is only the discovery of new facts unknown to the Administrator at the time of initial registration that can lead to a proceeding.