Chapter 5 section 2 Quiz Q & As

Under the Uniform Securities Act, which of the following statements are true about the authority of an Administrator? 1. A cease and desist order may be issued prior to a hearing. 2. A cease and desist order may be issued after a hearing. 3. A cease and desist order is valid for a maximum of 30 days. 4. A cease and desist order may be used to suspend the offering of a security.

1 and 2. In issuing a cease and desist order, the Administrator may provide prior notice and a hearing or may issue the order without prior notice or a hearing (summarily). There is no time period associated with the order. Cease and desist orders are directed against persons; it is stop orders that are directed against securities.

The Administrator may deny a person's registration as an investment adviser representative if the person meets which of the following criteria? 1. Has a recent securities-related criminal record 2. Has recently been convicted of a felony not related to the securities industry 3. Has lost a civil lawsuit within the last year 4. Was convicted of any misdemeanor within the last year that did not involve securities or money

1 and 2. The admin may deny a license to individuals who have been convicted of any felony or a securities or money-related misdemeanor within the last 10 years. Civil lawsuits will rarely have an effect upon securities registration.

Before taking any disciplinary action, with respect to a registration under the Uniform Securities Act, the Administrator must always do which of the following? 1. Obtain the approval of the appropriate state court. 2. Find that the action is in the public interest. 3. Cite a cause listed in the act.

2 and 3. Disciplinary actions, with respect to registration, may be taken by the Administrator after a finding of public interest and cause. Court orders are required only for legal action, such as seeking an injunction or appointment of a receiver over an adviser's assets.

The Administrator could deny or revoke the registration of a broker-dealer if: A) the CEO has intentionally failed to file advertising material with the Administrator. B) one of the firm's officers was convicted of a misdemeanor for being a scofflaw. C) an officer of the firm was found to be in violation of SEC rules 22 years ago. D) the major stockholder of the firm was convicted of a securities-related misdemeanor 125 months ago.

A. One of the causes for denial or revocation is a willful violation of the USA; failing to file advertising meets that criteria. You must know your calendar, 125 months is longer than 10 years.

Under the Uniform Securities Act, the state Administrator may, by order, deny, suspend, or revoke an investment adviser's registration for: A) violation of another state's securities laws within the last 5 years. B) conviction of a nonsecurities-related felony more than 15 years ago. C) conviction of a securities-related misdemeanor more than 15 years ago. D) lack of experience as an investment adviser.

A. a violation of any state or federal securities or commodities law within the last 10 years is grounds for denial, suspension, or revocation of registration by oder. That means no hearing is required.

Fact: an admin can summarily suspend a pending registration.

An admin can, on a summarily basis, suspend a pending registration but may not issue a stop order without a prior notice and an opportunity for a hearing. Cancellation is different from revocation and is not a result of disciplinary action. The admin may vacate or modify a stop order if he finds that the conditions that prompted its entry have changed.

Under the Uniform Securities Act, the Administrator may designate another official in the department to: A) set recordkeeping requirements. B) issue a cease and desist order. C) serve subpoenas. D) grant registration exemptions.

An official designated by the Admin may serve subpoenas because that is basically an admin function. However, an Admin cannot designate another official to grant registration exemptions or issue cease and desist orders. Recordkeeping requirements are set by law and cannot be altered by the Admin.

If it is in the public interest, under the Uniform Securities Act, an agent's registration may be suspended by the Administrator for all of the following reasons except: A) the agent is convicted of willful violations of the Uniform Securities Act. B) the agent is accused of violations of the antifraud provisions of the Uniform Securities Act. C) the agent is enjoined by a court of law from engaging in the securities business. D) it has been determination that the agent is not properly supervising her subordinates.

B. An accusation is not grounds for suspension; one is presumed innocent until proven guilty. Conviction, court injunction = suspension.

In order for the Administrator to suspend an agent's registration, compliance with the requirements of the Uniform Securities Act would not require that: A) notification be given to the employing broker-dealer of the final order. B) the agent receives court-appointed defense counsel if she can't afford her own. C) the agent is presented with an opportunity for a hearing. D) notice be given of the proposed action and hearing.

B. 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. The agent is permitted to appear with counsel (we hope this never happens to you, but it is a good idea to be represented by an experienced securities lawyer). However, it is the agent's responsibility to pay for that service. 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, of the reasons therefor, and that the matter will be set down for a hearing within 15 days after the receipt of a written request. Because 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 of that fact.

On determining that a registrant or applicant for registration is no longer in existence or has ceased doing business as either an agent or a broker-dealer, the Administrator may: A) cancel or suspend the registration. B) cancel the registration or application. C) issue a cease and desist order. D) revoke the registration.

B. A registration may be canceled if the registrant cannot be located, is found mentally incompetent, or has disbanded. This is known as nonpunitive termination of registration. Suspension, revocation, and a cease and desist order are for violations of the USA.

Which of the following statements relating to termination of registration of a securities professional registered under the Uniform Securities Act is true? A) An Administrator may deny a registration of a securities professional based solely on a lack of experience. B) An Administrator may revoke the registration of a securities professional who is declared mentally incompetent. C) Once the withdrawal is effective, the Administrator retains the right to commence an action for a period of one year. D) A registration, once in effect, may be withdrawn only under duress.

C. A person may request a withdrawal of a registration. Withdrawals become effective after 30 days if there are no revocation or denial proceedings in process. 1 year the admin can commence an action for activity if they find something on that person.

The issuance of a stop order by a state securities Administrator requires: A) an issuance of criminal charges. B) the subject to stop the activity without the opportunity for a hearing. C) the subject of the stop order to be given an opportunity for a hearing. D) an issuance of an injunction by a court with jurisdiction over such issues.

C. The subject of a stop order must be given the opp. for a 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. The USA does not grant the Admin the authority to issue criminal charges; that is the role of the court system.

The state securities Admin has the authority to: A) issue and enforce an injunction against a registered party. B) amend or alter the Uniform Securities Act. C) make, amend, or rescind rules, forms, and orders necessary to administer the Uniform Securities Act. D) issue a ruling under its authority with no requirement to publish that ruling.

C. A state securities admin may issue a ruling or order to comply with the blue-sky laws of the state and designate the use of certain forms but does not have authority to amend or alter the USA itself. Amending the version of the USA used in that state is the role of the state legislature. All rules and forms of the Admin must be published. Only the courts can issue injunctions.

Under the Uniform Securities Act, the Admin may do all of the following except: A) issue a stop order to revoke the effectiveness of a registration statement. B) issue a cease and desist order without a prior hearing. C) issue an injunction to force compliance with an Administrator's rule. D) revoke a previously allowed exemption.

C. Administrators cannot issue injunctions, but they may petition a court to issue an injunction against certain activities. An Admin may issue a stop order to revoke the effectiveness of a registration, issue a cease and desist order without a prior hearing, and may also revoke a previously allowed exemption.

The Administrator of a state securities department conducted a hearing regarding misconduct by an investment adviser registered at the state level. The Administrator required the adviser, as well as several clients who had lodged complaints against the adviser, to take a sworn oath that their testimony was true. Does the Administrator have the power to require sworn oaths? A) No, the Administrator was merely attempting to emphasize the seriousness of the hearing, but he holds no such power. B) Yes, the Administrator may require witness oaths because the Administrator is appointed as a judge. C) Yes, the Administrator is empowered to administer oaths as provided in the Uniform Securities Act, as enacted in the Administrator's state of jurisdiction. D) Yes, the Administrator has the power to require witness oaths because an Administrative hearing is functionally a legal proceeding.

C. The USA empowers Admin to administer oaths. Sworn oaths typically occur in conjunction with hearings.

A state-registered investment adviser is the subject of an injunction requested by the Administrator. As a result, A) a hearing must be granted within 15 days after receipt of a written request from the investment adviser. B) the registration of the investment adviser's investment adviser representatives will be suspended. C) upon the request of the Administrator, a receiver or conservator may be appointed over the investment adviser's assets. D) the registration of the investment adviser will be suspended.

C. Upon the request of the Admin, a receiver or conservator may be appointed over the investment adviser's assets. The Administrator does not have the legal power to compel compliance with the cease and desist order. To compel compliance in the face of a person's resistance, the Administrator must apply to a court of competent jurisdiction for an injunction. If the court issues a temporary or permanent injunction, upon the request of the Administrator, a receiver or conservator may be appointed over the defendant's assets. The injunction merely forces the investment adviser (or whomever is the subject) to cease the specified activity. It does not cancel any registrations. That could happen if the defendant refuses to obey the injunction and further legal action is taken. The 15-day hearing rule applies to summary orders, not cease and desist.

Under the Uniform Securities Act, all of the following could be cause for disciplinary review action by the state securities Administrator except: A) Ed is suspended from conducting business in the securities industry for a period of 6 months by FINRA. B) Joe files an application for registration as an investment adviser and omits the fact that he was convicted of fraud 12 years ago. C) Tom, a registered investment adviser, fails to disclose that he recently filed for bankruptcy protection. D) the ABC Advisory Group, a registered investment adviser, employs several investment adviser representatives as independent contractors.

D. Investment advisers may employ IARS as independent contractors. This is very common. Even though the Admin's power to deny a registration is limited to convictions within the past 10 years, being charged with or being convicted of any felony or a securities related misdemeanor requires disclosure. Failing to disclose a bankruptcy filing is cause for disciplinary action on the part of the Admin.

An applicant for registration as an IAR in this state was convicted four years ago of a non financially related crime in another state. Under that state's laws, the crime was a misdemeanor, but under this state's laws, it is a felony. When viewing this IAR's application, the Administrator will: A) treat the crime as any felony. B) censure the investment adviser for even thinking of employing this individual. C) treat the crime as a nonfinancial felony. D) treat the crime as a nonfinancial misdemeanor.

D. Even though the crime is a felony in the state where registration is being sought, the applicant's record shows a misdemeanor; therefore, this individual would not be subject to statutory disqualification.

Under which of the following circumstances may an Administrator revoke an adviser's registration? A) The adviser cannot be located after a reasonable search by the Administrator. B) The adviser is no longer in business. C) The adviser has been declared mentally incompetent by a court of jurisdiction. D) The adviser has been convicted of a nonsecurities-related felony.

D. If a registered IA committed a felony, regardless of whether it was securities related or not, its registration will be revoked, not canceled. An IA's registration may be canceled if the IA is found to be mentally incompetent, not be located, or is no longer in the business. revocation involves some sort of wrongdoing.

In conducting investigations, the Administrator may not: A) require a person to file a statement in writing and under oath. B) make investigations both inside the state and in other states to determine whether violations of the Uniform Securities Act have occurred in his state. C) publish information of any violation over the vigorous objections of a violator. D) make investigations outside the state to determine whether violations of the Uniform Securities Act have occurred in that other state.

D. the admin may require - written statements under oath - publicize violations - investigate anywhere necessary to determine whether or not a violation of the act took place in his state. He is not authorize to conduct investigations in other states to determine whether a violation of the USA occurred in those states. Those investigations are under the jurisdiction of their Admin.

Under the USA act, which of the following would most likely be a cause for denial of a registration? A) Conviction of a nonfinancial misdemeanor 7 years ago B) Conviction of a securities-related violation 12 years ago for which the prison sentence ended last month C) Lack of a degree from an accredited degree-granting institution D) A revocation order by another state's Administrator

D. When one's registration has been revoked by another state's Admin, any other admin will deny registration in their state. The securities-related violation occurred more than 10 years ago, and the misdemeanor is only a problem if its securities or money related.

Under the Uniform Securities Act, the Administrator is required to provide which of the following in a disciplinary proceeding? 1. Appropriate prior notice 2. Opportunity for a hearing 3. Written findings of fact and conclusions of law

all 3. In general, the admin must provide appropriate prior notice, opp. for a hearing, and written findings of fact and conclusions of law. Even if an order is issued summarily, that is, made effective upon issue without prior notice, the registrant must be notified upon issue of the order and given the opportunity to request a hearing.

Which of the following accurately describes a cease and desist order as authorized by the Uniform Securities Act? A) An order issued by a court of competent jurisdiction in the state requiring a business to stop an unfair practice B) An order issued by a federal agency to a brokerage firm to stop an advertising campaign C) An order from one brokerage firm to another brokerage firm to refrain from unfair business practices D) An order by the Administrator demanding a person to refrain from a practice of business believed by that Administrator to be unfair

d. a cease and desist order is a directive from an admin 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. Courts issue injunctions when the cease and desist order is ignored.

Cease and desist order vs. stop order

stop order requires a hearing.