s63 - 4
An agent enters into a transaction with a customer that is illegal under the Uniform Securities Act. The agent explains this to the customer, and the customer signs a statement that she knows that the transaction is illegal. Which statement is TRUE? A No action can be taken on the part of the Administrator B The Administrator can only censure the agent C The Administrator may only revoke the agent's registration D The Administrator may suspend or censure the agent and can pursue civil claims
he best answer is D. A customer signing a statement, that he or she knows that the transaction being performed for or by that customer is illegal, does not make it OK! The Administrator can pursue all available remedies against the agent, including censure, revocation of registration and can file a civil suit in court.
An Investment Adviser discovers that its computer system has been breached and personal client information has been stolen. Under Uniform State Law, the IA will be subject to: A Administrative action B Criminal prosecution C Civil liability D Mandatory arbitration
The best answer is A. NASAA requires that Investment Advisers put in cybersecurity protection. If client data is stolen, the State Administrator can penalize the IA by issuing an order revoking or suspending the IA's registration (and hence, ability to do business) in that State. In addition, the customer could sue the IA for negligence under common law - but this is very hard to prove. Note, however, a plaintiff would not be able to use the Uniform Securities Act as the basis for the suit. Both civil liability and criminal liability under the USA is based on a securities transaction that occurred. Cybersecurity does not come under USA.
An investment adviser representative who is both located and registered in New York State has clients in Florida. The State Administrator of Florida, located in Tallahassee, has subpoenaed the representative to testify in Tallahassee. The representative tells her manager about this and the manager tells her to ignore it, because she is located in New York and only New York can issue a subpoena. Which statement is TRUE? A The agent must comply with the subpoena and show up in Tallahassee on the date so ordered B The manager is correct and the agent may disregard the subpoena C The agent can petition the Administrator of the State of New York to void the subpoena D The agent must resign her registration with the State of Florida in order to disregard the subpoena
The best answer is A. A State Administrator has jurisdiction over transactions that occur in his State. Even though this representative is located in New York, because the firm has clients in Florida, the Florida State Administrator has jurisdiction over transactions that take place in Florida. The representative must comply with the subpoena to testify, otherwise he or she will be found in contempt of court.
Regarding the authority of State Administrators during an investigation, they: A have the power to subpoena witnesses B have no jurisdiction beyond the boundary of their State C may issue an injunction D may suspend or revoke a registration without notificatio
The best answer is A. A State Administrator has the authority to administer oaths and to subpoena witnesses during an investigation. They can do so both inside their State and outside their State. They cannot issue an injunction - this can only be done by a court of law. They may suspend or revoke a registration - but only upon giving the individual or firm, that is subject to the order, notice and the opportunity for a hearing.
In order for an agent based in State A to qualify for an exclusion from registration when contacting an individual vacationing in State B: I the agent must be registered in State A II the agent must be registered in State B III the individual must be an existing client IV the individual can be a new client A I and III B I and IV C II and III D II and IV
The best answer is A. An exclusion from registration is given to broker-dealers and their agents that have a place of business in a State (thus they must be registered in that State) that are dealing with pre-existing customers who are temporarily visiting other States. This addresses the fact that people travel widely throughout the United States and if that citizen who is on vacation in another State effects a securities transaction with his or her existing broker-dealer, then the State where the customer is vacationing will not require the broker-dealer and its agents to register. Note that the exclusion does not apply to new customers; only to pre-existing customers.
Which of the following falls under the jurisdiction of the Administrator of the State of New Jersey? A The purchase of call options by a customer living in New Jersey via a Nebraska-based broker-dealer's Internet web site B The sale of certificates of deposit by an Internet bank located in South Dakota to customers residing in the State of New Jersey C The delivery of securities by DTCC located in New York to customers located in the State of New Jersey D The redemption of mutual fund shares with the paying agent located in Massachusetts by customers located in the State of New Jersey
The best answer is A. An offer of securities made through any medium (such as the Internet), if received by a customer of a State, is subject to that State Administrator's jurisdiction. Since this customer is living in New Jersey, and accessed the Nebraska-based broker-dealer's website, the New Jersey (and Nebraska) Administrator(s) have jurisdiction. Offers of certificates of deposit by banks are not securities and hence do not fall under the Administrator's jurisdiction. The delivery of securities by a depository such as DTCC (Depository Trust and Clearing Corporation) is not subject to the Administrator's jurisdiction - it is the sale of securities that is subject to the Administrator's jurisdiction. Similarly, the redemption of mutual funds is not a sale of securities and the Administrator does not have jurisdiction.
A broker-dealer located in State A makes an offer of securities to a customer whose principal residence is in State B. The customer has temporarily moved to State C and has asked the post office in State B to forward the mail to the customer's address in State C. Which State Administrator(s) has (have) jurisdiction over the offer? I State A II State B III State C A I only B I and II only C I and III only D II and III only
The best answer is A. Because the broker-dealer is located in State A, that State Administrator has jurisdiction. Normally, if an offer is received in a State (B in this case), then State B's Administrator would have jurisdiction. But the offer was never received in State B because it was forwarded by the post office on to State C. Thus, an offer was never made in State B and that State Administrator does not have jurisdiction. One would think that because the offer was ultimately received in State C, that it would have jurisdiction, but this is not the case either. In this situation, the Uniform Securities Act makes an exception. The issue here is that the broker-dealer had no idea that the mail was forwarded to State C and should not be subject to the law of State C on this offer. The intent is to make sure that an innocent broker-dealer is not "entrapped" by a State and made subject to that State's law when an offer of securities is forwarded into that State by a third party without the broker-dealer's knowledge.
If an inadvertent sale of an unregistered non-exempt security takes place, the offerer: I is subject to civil liabilities under the Act II is subject to criminal liabilities under the Act III can offer to buy back the securities at original cost plus interest at a 6% stated legal rate IV can offer to buy back the securities at their current market value plus interest at a 6% stated legal rate A I and III B I and IV C II and III D II and IV
The best answer is A. If an inadvertent sale of an unregistered non-exempt security takes place, civil liabilities under the Act are applicable. Civil liabilities apply when the Act is violated without willful intent. If the Act is violated with willful intent, then criminal liabilities apply. The Act allows the offerer of the securities to offer to buy back the issue at the original cost plus interest paid at the legal rate in the State, plus any attorney's or court costs (net of any dividends or interest received by the holder). The legal rate of interest specified in the Act is 6%, but this can vary from State to State.
Which of the following statements are TRUE about an offer of rescission? I The offer can only be made prior to the institution of a lawsuit alleging a securities violation II The offer can only be made after the institution of a lawsuit alleging a securities violation III An offer must be made to buy back the security at the original purchase price and the customer must be paid interest at the legal rate in the State, less any dividend or interest income received from that security IV An offer must be made to buy back the security at the current market price and the customer must be paid interest at the legal rate in the State, less any dividend or interest income received from that security A I and III B I and IV C II and III D II and IV
The best answer is A. If an offer of rescission is made on the inadvertent sale of a non-exempt security that should have been registered under the Act, the offer can only be made prior to the institution of a lawsuit alleging a securities violation. An offer must be made to buy back the security at the original purchase price, plus the customer must be paid interest at the legal rate in the State (6%), less any dividend or interest income received from that security. Any offer of rescission must be accepted within 30 days of the offer.
NASAA administers the: A Uniform Securities Act B Securities Act of 1933 C Investment Advisers Act of 1940 D Investment Company Act of 1940
The best answer is A. NASAA is the North American Securities Administrators Association. Each State Administrator enforces the Uniform Securities Act - the State "Blue Sky Laws" that require registration of broker-dealers, their agents, non-federal covered advisers, and investment adviser representatives, in each State where they deal with the public. The Securities Acts of 1933 and 1934, the Investment Advisers Act of 1940, and the Investment Company Act of 1940, are all administered by the SEC.
Making an intentional omission of material fact when recommending a security to a customer would be considered fraudulent if: A a reasonable man would attach decision making importance to the omitted information B the information was not available to the general public at the time that the recommendation was made C the maker of the recommendation did not perform due diligence to determine the relevancy of the omitted information D under the circumstances, the maker of the recommendation did not, and could not, have known of the importance of the omitted information to the buyer of the securities
The best answer is A. The "reasonable man" test is used by courts in determining if an offer of a security was made fraudulently. Since a fraud is deemed to occur if there was an omission or misstatement of material fact when the offer of the securities was made, the court looks to see if a "reasonable man" would attach decision making importance to the omitted or misstated information. If the answer is yes, then a securities fraud has occurred.
A federal covered adviser with its only office in State A conducts business with three clients in State B. Who is permitted to audit the investment adviser? A The Administrator of State A B The Administrator of State B C Both the Administrators of State A and State B D Only the SEC because the adviser is "federal covered"
The best answer is A. The State only has jurisdiction if the adviser has an office in the State; or if the adviser has no office in the State, if the adviser has six or more clients in that State. This adviser has an office in State A, so it can be audited by the Administrator of State A. The adviser has no office in State B and has only three clients in State B, so the Administrator of State B has no jurisdiction.
An agent recommends that a customer purchase an unregistered non-exempt security. This is a violation of which section of the Uniform Securities Act? A Part I - Fraudulent and Other Prohibited Practices B Part II - Registration and Notice Filing Procedures For Broker-Dealers, Agents, Investment Advisers and Investment Adviser Representatives C Part III - Registration and Notice Filing Procedures Of Securities D Part IV - General Provisions
The best answer is A. The recommendation of an unregistered non-exempt security is a prohibited practice. For example, common stock of an issuer (a non-exempt security) cannot be recommended to a client unless it is either registered in the State; or if it is unregistered but qualifies for an exemption. Part I of the Act contains the Act's anti-fraud provisions and prohibited practices in general terms. Part II covers all the registration rules for BDs, their agents, IAs and IARs. Part III contains the rules for securities registration in a State. Part IV contains the Act's definitions, including the defined exempt securities and exempt transactions. It also details the Administrator's powers, civil liability and criminal liability provisions.
An RIA registered in State A is hired by a cruise ship line to offer investment advice to passengers during the cruise. The cruise ship line has obtained a letter from the State Securities Administrator of State A stating that the adviser is authorized to solicit accounts from the passengers from the port of embarkation, which is in State A. The adviser: A can solicit all of the passengers to buy advisory services B can only solicit accredited investors to buy advisory services C can only solicit sophisticated investors to buy advisory services D cannot solicit any of the passengers to buy advisory services
The best answer is A. This is a question right out of left field! Does the State Administrator have jurisdiction over offers of securities and advisory services made on cruise ships docked in that State? The answer would be yes. Of course, once the cruise ship leaves the dock and travels into international waters, then the State Administrator would not have jurisdiction. We have never heard of a State Administrator issuing a letter stating that an RIA is "authorized" to solicit accounts in a State, but since this is what is given in the question, then it would be OK. This is an awful question!
Under the Uniform Securities Act, the unintentional omission of material facts when offering or selling a security can result in: I Civil liability II Civil penalties III Criminal liability IV Criminal penalties A I only B I and II C III and IV D I, II, III, IV
The best answer is A. This is a subtle question. The omission of material facts when offering or selling a security results in Civil Liability under the Act. There are no Civil Penalties. The willful omission of material facts can result in Criminal Liability and Criminal Penalties.
Which action taken by the Administrator is the most severe? A Suspension B Revocation C Cease and Desist D Cancellation
The best answer is B. The Administrator can issue orders without giving prior notice. These orders can deny registration to an applicant; cancel registration; suspend registration; revoke registration; and the Administrator can issue a "cease and desist" order against any person for a violation of the Uniform Securities Act that has occurred; or that is about to occur. If an order is issued, the person that is the subject of the order must be given an opportunity for a hearing in State Court if he or she wants to get the order reversed. Of these, revocation is the most serious, since it is permanent - the individual or firm is prohibited from doing business in the State. A suspension has a fixed life and then is lifted. A cease and desist order basically is telling the registrant to stop doing something specific - such as distributing misleading advertising. A cancellation is cancelling a registration after year end if it is not renewed - there is no violation here. It is called a "non-punitive" order.
Civil suits alleging violation of the Uniform Securities Act must be brought: I within 2 years of discovery II within 3 years of discovery III no later than 2 years after the violation occurred IV no later than 3 years after the violation occurred A I and III B I and IV C II and III D II and IV
The best answer is B. Civil suits alleging violations of the Act must be brought within 2 years of discovery of the alleged violation, but no later than 3 years after the actual violation occurred.
A customer has brought a civil suit against an agent for violating the Uniform Securities Act. Two weeks before the court date, the agent dies. Which statement is TRUE? A The civil suit is terminated upon the death of the defendant B The civil suit survives the death of the defendant C The civil suit must be settled within 60 days of the defendant's death D The Administrator decides whether the suit is terminated or survives upon the defendant's death
The best answer is B. If a customer files suit against an agent alleging a violation of the Uniform Securities Act and the agent (the defendant in this case) dies, the suit lives on! (Hey, we need to keep the lawyers working!)
The Administrator is empowered to amend or rescind any rule of the Uniform Securities Act: A if such change is ratified by majority vote of the state legislature B as he deems necessary to carry out the provisions of the Act C if the change is approved by the Securities and Exchange Commission D if the change is approved by the Governor of that state
The best answer is B. The Administrator is empowered to amend or rescind any rule under the Uniform Securities Act as he or she deems necessary to carry out the provisions of the Act. The only portion of the Act that the Administrator cannot change is the one that defines exempt securities (such as U.S. Government bonds, municipal bonds, etc.)
The Uniform Securities Act empowers the State Administrator to conduct an investigation of an investment adviser if the: A adviser has an office in the State B act that gave cause to the investigation occurred in the State C adviser has no office in the State, and the act that gave cause to the investigation occurred in another State D the adviser has a telephone listing in the State
The best answer is B. The State Administrator has jurisdiction over any offers of securities or advisory services that occur with the Administrator's State. There is no requirement for a physical presence in the State - if the adviser solicits or does business in the State, then the Administrator has jurisdiction.
Under the Uniform Securities Act, in a civil suit brought by a purchaser against a seller that is alleged to have violated the Uniform Securities Act, the burden of proof rests with the: A Defendant B Plaintiff C State securities administrator D Judge presiding over the state court hearing the case
The best answer is B. The burden of proof in any lawsuit is placed on the plaintiff - not the defendant. The buyer of the securities is the plaintiff in the suit and must prove to the satisfaction of the court, that the seller (the defendant) violated the Uniform Securities Act.
What is the maximum dollar fine that can be imposed for criminal liability and criminal violations of the Uniform Securities Act? A $2,500 B $5,000 C $7,500 D $10,000
The best answer is B. The fine that can be imposed for criminal violations of the Uniform Securities Act is $5,000 per offense.
The intentional omission of material facts when offering or selling a security can result in: I Civil liability II Civil penalties III Criminal liability IV Criminal penalties A I and II only B III and IV only C I and IV only D II and III only
The best answer is B. This is a subtle question. The willful omission of material facts can result in Criminal Liability and Criminal Penalties. The unintentional omission of material facts when offering or selling a security results in Civil Liability under the Act. There are no Civil Penalties.
Transactions that violate the Uniform Securities Act are voidable at the option of the: A Issuer B Purchaser C Seller D Administrator
The best answer is B. Transactions that violate the Act are voidable by the purchaser. The seller is obligated under civil liabilities to pay the investor the original cost of the securities plus 6% interest.
An agent and her customer reside in State A, where the agent is registered. The agent is vacationing in State B, where her client also happens to be vacationing. While in State B, the agent makes an offer of securities to the client. Who has jurisdiction over the transaction? A State A only B State B only C Both States A and B D Any State that has adopted the Uniform Securities Act
The best answer is B. Under Uniform State Law, the Administrator has jurisdiction over an offer of securities or advisory services if an offer: originates in the Administrator's State; is directed into the Administrator's State; or is accepted in the Administrator's State. Basically, the "idea" behind State law is that there must be a "presence" in the State for that State Administrator to have jurisdiction. In this scenario, the "vacationing" exclusion does not apply because it ONLY applies when an agent registered in another State makes an offer into a State where the customer is vacationing. It does NOT apply if both the agent and the customer are both in another State, where the offer is made. Both the agent and the customer are vacationing in State B, where the offer of securities is made. Therefore, State B has jurisdiction. The agent did not make an offer of securities from State A and the offer was not accepted in State A, so State A does not have jurisdiction in this instance.
An Investment Adviser located in State A has 3 clients - 1 each in States X, Y and Z. The Investment Adviser places an advertisement offering its services in a local newspaper and gives a seminar about its services in State Z. The Investment Adviser must be registered in: A State A only B State Z only C States A and Z D States A, X, Y and Z
The best answer is C. Because the Investment Adviser is physically located in State A, it must be registered in State A. Additionally, advertising in the newspaper in State A requires it to be registered in State A. The Investment Adviser must be registered in State Z because it is offering a seminar there. The Investment Adviser is exempted from registering in States X and Y because it only has 1 client in each State and does not have an office in those States. An adviser with no office in a State, that deals with 5 or fewer clients in a State, is exempted from registration.
A sales representative who fails to register as an agent of a broker-dealer: I has committed a felony II has committed a misleading Act III is subject to civil liability IV is subject to criminal liability A I and III only B I and IV only C II and III only D II and IV only
The best answer is C. If a sales representative fails to register in a state, this is not deemed to be a serious enough offense for criminal action. This person is subject to civil liability.
Which of the following come under the jurisdiction of the State Administrator? I A mailing of sales literature to a customer in that State II A mailing of sales literature to a customer in a neighboring State III A television broadcast from within that State, received in that State IV A television broadcast from a neighboring State, received in that State A I and II only B III and IV only C I, II, and III D I, II, III, IV
The best answer is C. If an offer of securities is directed into a State, it comes under the jurisdiction of that State Administrator. Thus, Choices I and II clearly fall under the Administrator's jurisdiction. Regarding television broadcasts, the interpretation is that if the broadcast originates in the State; and is received in the State; then it falls under the jurisdiction of State Administrator in the receiving State. If the broadcast originates in another State; and is received in the State; then it does not fall under the jurisdiction of the State Administrator in the receiving State. Simplified, this means that only the Administrator in the State from which the broadcast originated has jurisdiction. Thus, Choice III is correct; and Choice IV is incorrect.
If a cease and desist order is issued by the Administrator against any person, this action: A is binding and non-appealable B may be submitted to binding arbitration C may be appealed by a written petition to the appropriate court of law D may be appealed by a written petition to the Securities and Exchange Commission
The best answer is C. If the Administrator issues a cease and desist order against any person, this action may be appealed by making a written petition to the appropriate court of law within 60 days of the entry of the order.
The Administrator has the right to: I issue an order directing a person to cease and desist from engaging in an action that violates the Act II issue an order suspending, revoking or conditioning an exemption from registration given to a broker-dealer III issue an order imprisoning an agent for not more than 10 years for willfully violating the Act, or a rule adopted or order issued under the Act IV issue an order denying, suspending application of, limiting or revoking an exemption given to a security or a transaction A I and II only B III and IV only C I, II and IV D I, II, III, IV
The best answer is C. The Administrator has the right to issue a cease and desist order; can issue an order suspending, revoking or conditioning an exemption from registration given to a broker-dealer or agent; and can issue an order denying, revoking or limiting an exemption given to a security or a transaction. The Administrator cannot issue an order imprisoning a person for violating the Act; such an order can only be issued by a court of law.
The Administrator can take which of the following actions? I Coordinate inspections with those conducted by the Securities and Exchange Commission II Inspect a broker-dealer located in another State that does business in the Administrator's State III Require a witness to testify in a hearing, even though the testimony may tend to incriminate that witness IV Suspend the constitutional privilege against self-incrimination available to an individual A I and III B II and IV C I, II, III D I, II, III, IV
The best answer is C. The Administrator may coordinate inspections with those conducted by the Securities and Exchange Commission; may inspect a broker-dealer located in another State that does business in the Administrator's State; and may require a witness to testify in a hearing, even though the testimony may tend to incriminate that witness. However, the Administrator cannot suspend the constitutional privilege against self-incrimination available to an individual, since this Federal law (5th Amendment to the Constitution) supersedes any State law.
During the past year, an agent of a registered broker-dealer has offered partnership units to wealthy investors in a private placement. The agent finds that he has been named in a civil lawsuit filed by one of the buyers of the private placement units, claiming that untrue statements were made by the agent in connection with the sale of the issue. Which of the following is a defense against the buyer's claim that is most likely to be upheld by a court of law? A The agent can claim that the buyer was informed of all material facts and is filing a frivolous lawsuit to extract a large settlement from the agent B The agent can claim that because the investor was wealthy, he or she is "sophisticated" and understood the merits of the transaction prior to entering into a contract to buy the partnership unit C The agent can claim that he took reasonable care to ensure that no untrue statements were made at, or before, the sale of the securities and that the agent did not, and could not, know of the untrue statement D The agent does not have to make a showing in a court of law because the burden of proof rests on the claimant and not on the defendant in civil suits
The best answer is C. The agent is being accused of making untrue statements when selling a security to a customer. Making untrue statements of material fact or omitting statements of material fact when selling securities is fraudulent. However, if the agent can show that he took reasonable care to ensure that no untrue statements were made in connection with the sale of the security and that the agent did not, and could not, know of the untrue statement, then the court will reject the claim of the customer. This is the only defense of the 4 choices offered that addresses the customer's claim. The other defenses offered do not address the customer's claim (e.g., the suit is frivolous; the customer is wealthy and knew what he was doing, etc.)
The anti-fraud provisions of the Uniform Securities Act would apply to the sale in the State of: A both fixed and variable annuities B both whole life and variable life insurance policies C variable annuities only D both variable annuities and variable life insurance
The best answer is D. Anti-fraud questions are simple - the anti-fraud rules apply to everyone and everything! However, the Uniform Securities Act only applies to fraud involved in the sale of securities. It does not apply to fraud involved in the sale of a pure insurance product - then that State's insurance laws apply. Both a fixed annuity and a whole life insurance policy are insurance products and are not securities. In contrast, any variable product, either a variable annuity or variable life insurance, is defined as a security, since the underlying separate account funding the contract is invested in mutual funds.
A Web site created by a broker-dealer will NOT be considered to be an offer of securities in a State as long as all of the following conditions are met EXCEPT the communication: A is limited to "general" information B does not attempt to effect securities transactions C contains a legend that the broker-dealer can only effect business in that state if it is registered in the state D is filed in advance of use with the state Administrator
The best answer is D. As long as a web site is limited to "general" information and does not attempt to induce customers to effect securities transactions, then an "offer" is not being made in the State. In addition, the Web site must show a legend that the broker-dealer can only transact business in the State if it is first registered in that State. Finally, any follow-up "individualized" responses to customers involving securities transactions require that the broker-dealer and its agents be registered in the State. There is no requirement to file the Web site with the state Administrator in advance of use.
A registered investment adviser located in State A only sells its services to registered investment companies. The RIA has a client with its home office in State B. The client also has an office in State C. State C can: A require the investment adviser to register as an RIA in the State B require the client to register as an RIA in the State C require the RIA to have an office in the State D do nothing
The best answer is D. Because the adviser is located in State A, it must file notice there (since it is a federal covered adviser.) There is no mention of the adviser having a location in State C. Since the adviser's only client in the State is an investment company (an institutional investor), and the adviser has no location in the State, State C has no jurisdiction over the adviser. Note that if the adviser either had an office in State C, or if the adviser had more than 5 retail clients in State C, then it would have to file notice in State C as well.
Civil liability arises for an investment adviser under the Uniform Securities Act for all of the following reasons EXCEPT the investment adviser: A fails to supervise its employees B fails to disclose to a customer that it acted as principal, selling a security from the adviser's proprietary account to the customer C omits a material fact when making a sales presentation to a client D recommends the purchase of registered non-exempt securities to a client
The best answer is D. Civil liability under the Uniform Securities Act means that person violated the Act without malice or willful intent. Violations of the Act include failure to supervise employees; failing to disclose conflicts of interest; and making misrepresentations or omitting material facts when offering securities to customers. Since non-exempt securities are required to be registered in the State, recommending the purchase of registered non-exempt securities is just fine - as long as the recommendation is suitable. Recommending the purchase of unregistered non-exempt securities would be a violation, however.
Which statement is FALSE about rules created by the Administrator? A Rules are not written as part of the Uniform Securities Act but carry the weight of law B Rules are issued by the Administrator to provide interpretation of the Uniform Securities Act C Rules issued by the Administrator cannot contravene the provisions of the Uniform Securities Act D Rules issued by the Administrator are not required to be published as a matter of public record
The best answer is D. Rules are written by the Administrator to interpret the provisions of the Uniform Securities Act. The basis for the issuance of the rule is to protect investors. The rules cannot contravene the Act's provisions. Administrative rules are a matter of public record - otherwise, how would anyone know what the rules are?
Which statement is FALSE about rules issued by the Administrator? A The issuance of the rule must be consistent with the public interest and protection of investors B The rule cannot contravene provisions of federal law that are preemptive C The rule can be coordinated with rules issued by the SEC D The Administrator must update the rules every 3 years to ensure their compliance with federal statutes
The best answer is D. Rules are written by the Administrator to interpret the provisions of the Uniform Securities Act. The basis for the issuance of the rule is to protect investors. These rules cannot contravene federal law, which has supremacy. The rule can be coordinated with the SEC's version of that rule. There is no requirement for 3-year updating of Administrative rules.
The State Administrator is empowered to do which of the following? I Administer oaths II Subpoena witnesses III Conduct investigations IV Require the production of documents A I and II only B III and IV only C I, II, III D I, II, III, IV
The best answer is D. The Administrator can conduct investigations, take evidence, subpoena witnesses, and can require the production of books, papers, and documents relevant to the inquiry. The Administrator can administer oaths at hearings so that if the person lies, they can be held liable; and can order a suspension or revocation of a broker-dealer's or adviser's registration based upon the findings of fact from such investigations. The Administrator can also issue a cease and desist order against the broker-dealer, adviser, or its representatives.
The Administrator can do all of the following EXCEPT: A subpoena witnesses within that State B subpoena witnesses in other States C issue a cease and desist order to a person in the securities business D enjoin a person from engaging in the securities business
The best answer is D. The Administrator has the power to subpoena witnesses (both in and out of that State); can issue a cease and desist order; and can revoke a registration. The Administrator cannot enjoin a person from engaging in the securities business - such an action can only be taken in a court of law.
An investment adviser representative works for a federal covered adviser. The IA is SEC registered and has filed notice in State A where it has an office. The IAR is registered in State A. The IAR has engaged in a pattern of trading in client accounts without having authorization to do so. Which statement is TRUE about the State Administrator's ability to take disciplinary action? A The State Administrator cannot take disciplinary action against the investment adviser because it is federal covered, nor can it take disciplinary action against the investment adviser representative of the federal covered adviser B The State Administrator cannot take disciplinary action against the investment adviser because it is federal covered, but the Administrator can take disciplinary action against the investment adviser representative C The State Administrator can take disciplinary action against the federal covered investment adviser, but the Administrator cannot take disciplinary action against the investment adviser representative D The State Administrator can take disciplinary action against the federal covered investment adviser, and it can take disciplinary action against the investment adviser representative of the federal covered adviser
The best answer is D. The NASAA Model Rule on Unethical Practices of IAs and IARs, makes it clear that each State Administrator has jurisdiction over investment advisers and their representatives, and also retains jurisdiction over federal covered advisers to the extent that the conduct is fraudulent or deceptive. Unauthorized trading in a customer account is fraudulent, so not only is the IAR subject to disciplinary action by the State Administrator, the federal covered advisory firm is subject to disciplinary action by the State Administrator as well. Also, though not covered in the question, the SEC can take action against the federal covered adviser for the violation.
If an investment adviser is found to be insolvent, the Administrator has the power to: I issue a cease and desist order, with or without a prior hearing, directing the investment adviser stop dealing with clients II petition the court to issue a permanent injunction against a person from engaging in the investment advisory business III make the showing required to appoint a receiver to protect the assets of customers held in custody of the investment adviser A I only B II only C I and II D I, II, III
The best answer is D. The State Administrator is empowered, upon discovering a violation of the Uniform Securities Act, to: issue a cease and desist order, with or without a prior hearing (but the opportunity for a hearing after the order is entered must be provided); seek a permanent injunction (from the appropriate court) against a person from engaging in the investment advisory business; and can make a showing (to a court) so that a receiver is appointed to protect the assets of customers held in custody by the investment adviser. When taking such actions, an opportunity for a hearing must be provided to the investment adviser.
Actions that are violations of the Uniform Securities Act could cause that individual to be subject to: I State government anti-fraud provisions II Federal Government anti-fraud provisions III Common law deceit provisions A I only B III only C I and III D I, II, III
The best answer is D. The action that gives rise to a violation of Uniform State law can also cause one to be subject to Federal charges as well. For example, insider trading is a violation of both State and Federal law. Everyone is subject to common law provisions, which govern such things as contracts and liability.
An agent is registered in State Y. The agent accompanies a customer to State Z on a golf outing, where the agent makes an offer of securities to the customer. Which statements are TRUE? I State Y has jurisdiction over the offer of securities II State Z has jurisdiction over the offer of securities III The agent may qualify for a de minimis exemption in State Y IV The agent may qualify for a de minimis exemption in State Z A I and III B I and IV C II and III D II and IV
The best answer is D. Under Uniform State Law, the Administrator has jurisdiction over an offer of securities or advisory services if an offer: originates in the Administrator's State; is directed into the Administrator's State; or is accepted in the Administrator's State.Basically, the "idea" behind State law is that there must be a "presence" in the State for that State Administrator to have jurisdiction. In this scenario, the "vacationing" exclusion does not apply because it ONLY applies when an agent registered in another State makes an offer into a State where the customer is vacationing. It does NOT apply if both the agent and the customer are both in another State, where the offer is made. Both the agent and the customer are vacationing in State Z, where the offer of securities is made. Therefore, State Z has jurisdiction. The agent did not make an offer of securities from State Y and the offer was not accepted in State Y, so State Y does not have jurisdiction in this instance. If the agent makes a "few" offers to customers in State Z, the agent may qualify for a de minimis exemption in the State (but this is only available to broker-dealers and their agents in a minority of States). The agent gets no such exemption in State Y because the agent is physically located there.
Which of the following statements about penalties under the Uniform Securities Act are TRUE? I Criminal liability may be offset by rescission II Civil liability may be offset by rescission III The statute of limitations on criminal actions is 5 years IV The statute of limitations on civil actions is 3 years A I and III only B II and IV only C II, III, IV D I, II, III, IV
C II, III, IV
Under the Uniform Securities Act, the Administrator has the power to issue an order: A enjoining an agent from engaging in the securities business B requiring civil restitution to a person that has been harmed by the actions of the agent C imposing criminal penalties on the agent for willful violations of the Act D suspending the registration of the agent
The best answer is D. Only a court of law can enjoin someone from being in the securities business; can require civil restitution; and can impose criminal penalties. The Administrator has the power to issue an order (that's all he can do) that suspends, denies or revokes registration; and the Administrator can issue a cease and desist order.
Under the provisions of the Uniform Securities Act, for willful violations, the State Administrator can: A institute criminal proceedings B impose a monetary fine C file suit under civil liability provisions D revoke registration of persons
The best answer is D. The State Administrator may, by order, deny, suspend or revoke any registration in the State. The Administrator does not have the power to institute criminal or civil proceedings, or to impose a monetary fine. The Administrator may refer a case to the State Attorney General for criminal prosecution, and if a conviction results, a court of law can impose a fine and a jail sentence.
