Under the Uniform Securities Act, the state Administrator may by order deny, suspend or revoke an investment adviser's registration for:
A) lack of experience as an investment adviser.
B) violation of another state's securities laws within the last 5 years.
C) conviction for a nonsecurities-related felony more than 15 years ago.
D) conviction for a securities-related misdemeanor more than 15 years ago.
Answer: B
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 order. This means that no hearing is required. Convictions are grounds for administrative action only if they occurred within the past 10 years. Lack of experience is not sufficient cause for revoking or denying registration.
According to the USA, under which of the following circumstances may an Administrator cancel an agent's registration?
A) The Administrator determines it would be in the public interest.
B) The agent is the subject of an insider trading lawsuit.
C) The agent has admitted to selling unregistered exempt securities to individual clients.
D) The agent is judged to be mentally incompetent.
Answer: D
Registration may be canceled by the Administrator if the registered individual has been judged mentally incompetent. Cancellation is a nonpunitive action of the Administrator.
Under the Uniform Securities Act, the Administrator may designate another officer to:
A) serve subpoenas.
B) grant registration exemptions.
C) issue a cease and desist order.
D) set recordkeeping requirements.
Answer: A
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.
The Uniform Securities Act provides that the state Administrator may deny the registration of a broker/dealer for all of the following reasons EXCEPT that:
A) a willful violation of the Uniform Securities Act has occurred.
B) the applicant is financially insolvent.
C) the applicant is enjoined temporarily from engaging in the securities business.
D) the applicant is not qualified due to a lack of experience.
Answer: D
If the broker/dealer qualifies by virtue of training or knowledge, registration cannot be denied for lack of experience only. Registration may be denied if the applicant willfully violates the Uniform Securities Act, is financially insolvent, or has been enjoined from engaging in the securities business.
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.
A) II and III.
B) I, II and III.
C) I and II.
D) I and III.
Answer: B
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.
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.
A) I and II.
B) I and III.
C) III and IV.
D) II and IV.
Answer: D
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.
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.
A) II and IV.
B) II, III and IV.
C) I, II and III.
D) I and III.
Answer: C
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.
Under the USA, which of the following are grounds for suspension, denial, or revocation of an issuer's registration statement?
Information in the registration statement is incomplete.
Unreasonable compensation to the underwriters.
Failure to pay filing fees.
The security is subject to an administrative stop order in a federal court.
A) I, II, III and IV.
B) I and II.
C) I and III.
D) II and IV.
Answer: A
Incomplete information on the registration statement, unreasonable underwriting compensation, failure to pay filing fees, and a security subject to an administrative stop order in federal court are all grounds for suspension, denial, or revocation of an issuer's registration statement.
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) revoke the registration.
B) issue a
cease and desist order.
C) cancel the registration or application.
D) cancel or suspend the registration.
Answer: C
A registration may be canceled if the registrant cannot be located, is found mentally incompetent, or has disbanded. This is known as non-punitive termination of registration. Suspension, revocation, and a cease and desist order are for violations of the Uniform Securities Act.
The Administrator may deny a person's registration as an investment adviser representative if the person meets which of the following criteria?
Has a recent securities-related criminal record.
Has recently been convicted of a felony not related to the securities industry.
Has lost a civil lawsuit within the last year.
Was convicted of any misdemeanor within the last year that did not involve securities or money.
A) I and II.
B) I and IV.
C) II and III.
D) III and
IV.
Answer: A
The Administrator 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.
Under the USA, the Administrator may do all of the following EXCEPT:
A) revoke a previously allowed exemption.
B) issue an injunction to force
compliance with an Administrator's rule.
C) issue a stop order to revoke the effectiveness of a registration statement.
D) issue a cease and desist order without a prior hearing.
Answer: B
Administrators cannot issue injunctions but they may petition a court to issue an injunction against certain activities. An Administrator 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.
An agent's license could be revoked if he were any of these EXCEPT:
A) declared insolvent.
B) convicted of a nonsecurities-related felony.
C) under 21 years of age.
D) convicted of a securities-related misdemeanor.
Answer: C
The Uniform Securities Act has no age specifications (other than that the individual be of legal age, which, in most states is 18). Once registered, an agent's license can be revoked if the agent is convicted of a securities-related misdemeanor or any felony. Insolvency is a cause for revocation of the registration of any securities professional.
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.
A) I, II and III.
B) II, III and IV.
C) II and IV.
D) I and IV.
Answer: C
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.
Which of the following statements would justify an Administrator's denial of a security's registration?
The order is in the public interest.
The company has not been paying dividends.
The underwriter's compensation is excessive.
A) I and II.
B) III only.
C) I and III.
D) I only.
Answer: C
An Administrator's denial of a security's registration must be in the public interest. The underwriter's compensation may not be excessive.
Under the USA, a state securities Administrator can:
start an investigation against a registrant even if a violation has not yet occurred.
subpoena witnesses living in the Administrator's state only.
subpoena witnesses living outside the state.
begin an investigation only after a violation of the act has
occurred.
A) II and IV.
B) I and III.
C) I and II.
D) II and III.
Answer: B
Under the USA, the Administrator has a broad investigative authority and may begin an investigation against a registrant before a violation has occurred, and may subpoena witnesses in any state.
Under the USA, a sales 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 USA.
B) the agent is accused of violations of the antifraud provisions of the USA.
C) the agent is enjoined by a court of law from engaging in the securities business.
D) it has been discovered that the agent is not properly supervised.
Answer: B
An accusation is not grounds for suspension, unlike convictions, court injunctions, and lack of supervision.
Under the Uniform Securities Act, which of the following could be cause for disciplinary review action by the state securities Administrator?
Joe files an application for registration as an investment adviser and omits the fact that he was convicted of fraud 12 years ago.
Tom, a registered investment adviser, fails to disclose that he recently filed for bankruptcy protection.
The ABC Advisory Group, a registered investment adviser, employs several investment adviser
representatives as independent contractors.
Ed is suspended from conducting business in the securities industry for a period of 6 months by FINRA (NASD).
A) III and IV.
B) I, II and IV.
C) I and II.
D) II and IV.
Answer: B
Even though the Administrator's power to deny a registration is limited to convictions within the past 10 years, 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. Investment advisers may employ investment adviser representatives as independent contractors.
An Administrator has specific authority under the USA to:
suspend the registration of a
security if the suspension is in the public interest and the offering has excessive commissions.
issue emergency injunctions to prevent a violation of the act.
enforce subpoenas in the state at request of an Administrator of another state for alleged violations that occurred in another state.
require that the proceeds from an offering be held in escrow until issuer receives a certain percentage of the sale of the securities offered.
A) I, II and IV.
B) I, III and IV.
C) I
only.
D) II and III.
Answer: B
The Administrator may impound the proceeds of an offering in an escrow account until the issuer receives a specified amount. The Administrator may also suspend a security's registration if excessive commissions are charged as part of the offering. State Administrators have the authority to cooperate with each other in enforcing the provisions of USA by ensuring that the subpoenas from other states are enforced. Injunctions are judicial orders that can only be issued by a court of law, not by an administrative agency such as a state securities Administrator.
An Administrator may issue a stop order if it is in the public interest and the:
A) registrant is subject to an administrative stop order of a neighboring state.
B) Administrator disapproves of the quality of the products manufactured by the registrant.
C) registrant refuses to pay the
Administrator a personal fee in addition to filing fees.
D) registrant is not registered in all states in which the security is proposed to be registered.
Answer: A
An Administrator has the authority under the USA to issue a stop order if a registrant is subject to a stop order in another state. The Administrator does not have the authority to approve or disapprove of the quality of products manufactured by a registrant. The Administrator may not use the office for personal gain and therefore may not request personal fees. The Administrator may not deny a registration on the basis of its lack of registration in other states.
In conducting investigations, the Administrator may:
require a person to file a statement in writing and under oath.
publish information of any violation over the vigorous objections of a violator.
make investigations both inside the state and in other
states to determine whether violations of the USA have occurred in his state.
make investigations outside the state to determine whether violations of the USA have occurred in that other state.
A) I and II.
B) II and III.
C) I, II, III and IV.
D) I, II and III.
Answer: D
The Administrator may require written statements under oath, publicize violations, and investigate anywhere necessary to determine whether or not a violation of the act took place in his state. However, he is not authorized to conduct investigations in other states to determine whether a violation of the USA has occurred in those states.
An Administrator may deny or suspend a registration in all of the following situations EXCEPT:
A) if the registrant has failed to properly supervise agents and investment adviser representatives.
B) if the applicant is not qualified on the basis of experience.
C) if the applicant was convicted of a misdemeanor involving securities within the last 10 years.
D) if the applicant has been the subject of an adverse order entered by the Administrator of another state within the past 10 years.
Answer: B
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 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 convicted of a nonsecurities-related felony.
D) The adviser has been declared mentally incompetent by a court of jurisdiction.
Answer: C
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, 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.
A) I, II, III and IV.
B) II and IV.
C) I and II.
D) I and IV.
Answer: C
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.
The Administrator may:
deny a registration if the registrant does not have sufficient experience to function as an agent.
limit a registrant's functions to that of a broker/dealer if, in the initial application for registration as an investment adviser, the registrant is not qualified to act as an adviser.
take into
consideration that the registrant will work under the supervision of a registered investment adviser or broker/dealer in approving a registration.
deny a registration, if it is prudent in view of a change in the state's political composition.
A) III and IV.
B) II and III.
C) I and II.
D) I and IV.
Answer: B
The Administrator may deny, suspend, or revoke a registration for many reasons, but they must be in the interest of the public. The Administrator may determine that an applicant, in his initial application for registration for an investment adviser, is not qualified to act as an adviser and thus limit the registration to that of a broker/dealer. The Administrator can also take into consideration whether the registrant will work under the supervision of a registered investment adviser or broker/dealer when approving an application. Lack of experience is insufficient reason for denial.
An Administrator may summarily suspend a registration pending final determination of proceedings under the USA. However, the Administrator may NOT enter an 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.
A) II, III and IV.
B) I, II and III.
C) I only.
D) I and II.
Answer: B
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.
Under the Uniform Securities Act, all of the following statements regarding a broker/dealer withdrawing its registration are true EXCEPT:
A) it
cannot take effect if the Administrator is instituting a revocation proceeding.
B) it is generally effective 30 days after written notification.
C) it must be in writing.
D) it prevents the broker/dealer from re-registration in the future.
Answer: D
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.
The Uniform Securities Act invests the Administrator with many powers over the activities of agents and broker/dealers. Which of the following actions does NOT fall within the Administrator's powers?
A) Issuing cease and desist orders without a hearing.
B) Conducting investigations of broker/dealers residing outside the Administrator's state.
C) Suspending an agent's registration without an opportunity for a hearing.
D) Issuing subpoenas to persons residing outside the
Administrator's state.
Answer: C
Under the USA, no suspension or revocation may take place before a hearing.
The Administrator has authority to:
issue a cease and desist order without a hearing.
issue a cease and desist order only after a hearing.
suspend a securities registration upon discovering an officer of an issuer whose securities are traded on the NYSE has been convicted of a
securities-related crime.
sentence violators of the USA to 3 years in prison.
A) I and III.
B) II and III.
C) II and IV.
D) I only.
Answer: D
The Administrator may issue a cease and desist order without a hearing. Sentencing is only done by a court and suspension is a punitive action that may only take place after a hearing In this particular instance, since the NYSE listed stock is considered a federal covered security, it cannot be regulated by the state.
Among the powers granted to the Administrator under the Uniform Securities Act is the power to:
A) deny the registration of an agent solely because of lack of experience.
B) subpoena witnesses or documents.
C) appoint a SIPC trustee.
D) take criminal action against an agent who has committed fraud.
Answer: B
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.
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:
A) revoke the registration statement, denying the applicant a hearing for an unlimited amount of time.
B) revoke or deny the registration statement and must schedule a hearing within 30 days of issuing the summary process order.
C) deny or revoke the registration statement, but must provide the applicant with the opportunity for a hearing within 15 days of the written request for such hearing.
D) not revoke or deny the registration statement until a hearing takes
place.
Answer: C
The Administrator may deny or revoke the registration statement but must provide the applicant with an opportunity for a hearing within 15 days of a written request for such hearing.
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:
A) issue a
cease and desist order.
B) issue an order that permanently bars the investment adviser representative from conducting business in the state.
C) seek a court injunction to prevent the pending violation.
D) withdraw the investment adviser representative's license.
Answer: A
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.
Under the Uniform Securities Act, the Administrator may:
A) relax the antifraud provisions for investment adviser representatives not residing in the state.
B) make rules, orders, and forms the Administrator considers necessary to carry out the provisions of the act.
C) waive any requirement of the act he deems inappropriate.
D) waive
only those requirements of the act that are nonbinding.
Answer: B
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.
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:
A) 45 days.
B) 60 days.
C) 15 days.
D) 30 days.
Answer: C
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.
Which of the following statements is TRUE?
A) Hearings of an Administrator must be held in public.
B) An Administrator may not refuse a registrant's request to hold hearings in private.
C) An Administrator may, at the request of a registrant, hold hearings in private.
D) All administrative hearings under the USA must be held in a court of competent jurisdiction
Answer: C
An Administrator has the discretion to hold hearings in private. A registrant cannot demand that a hearing be held in private. Hearings are administrative actions, and are therefore not held in courts.
Under the Uniform Securities Act, the Administrator may:
gather evidence within its state.
gather evidence in any state.
subpoena witness.
require evidence be produced from outside the state.
A) I, II, III and IV.
B) I
and II.
C) I and III.
D) II and III.
Answer: A
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.
Which of the following statements relating to termination of registration of a securities professional registered under the USA is TRUE?
A) A registration, once in effect, may never be voluntarily
withdrawn.
B) An Administrator may deny a registration of a securities professional based solely on a lack of experience.
C) An Administrator may revoke the registration of a securities professional who is declared mentally incompetent.
D) Once the withdrawal is effective, the Administrator retains the right to commence an action for a period of one year.
Answer: D
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. However, there remains a one year period during which the Administrator may commence an action for activity that occurred when the professional was registered.
The issuance of a stop order by a state securities Administrator requires:
A) an issuance of an injunction by a court with jurisdiction over such issues.
B) the subject to stop the activity without
the opportunity for hearing.
C) an issuance of criminal charges.
D) the subject of the stop order be given an opportunity for a hearing.
Answer: D
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.
If, in the opinion of the Administrator, an agent is about to engage in a prohibited activity, the Administrator may:
A) issue a cease and desist order.
B) arrest the agent.
C) issue an injunction.
D) suspend the agent's registration pending the outcome of a hearing.
Answer: A
If the Administrator suspects a prohibited action is about to take place, a cease and desist order will be issued in an attempt to prevent that activity. Should the agent refuse to halt, then the Administrator will apply to the courts for an injunction. Suspension of registration takes place after a hearing, and the Administrator does not have the power to arrest anyone.
The Administrator of State X receives a phone call warning that within the next couple of weeks, a scam is going to be perpetrated in his state by someone from State Y. The tipster even supplies the Administrator with names of people who will be involved and ends the conversation by telling the Administrator that he himself is a resident of State Z. Which of the following would be done?
A) The State X Administrator would contact a court of competent jurisdiction to obtain an injunction.
B) Because several states are involved, the Administrator must turn this information over to the SEC.
C) The State X Administrator would
immediately begin an investigation.
D) The State X Administrator would publish a warning to all residents.
Answer: C
It's the old saying, "where the Administrator smells smoke, he can go looking for the fire."
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.
A) I and II.
B) I and III.
C) II and III.
D) II and IV.
Answer: A
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.
To protect the public, the Administrator may:
deny the registration of an agent with insufficient net capital.
require an applicant for registration as both a broker/dealer and an investment adviser to limit activities to those of a broker/dealer due to lack of qualifications to render investment advice.
require an applicant for registration to submit to an oral examination.
A) I, II and III.
B) II and
III.
C) I and II.
D) I and III.
Answer: B
Agents never have a net capital requirement, but broker/dealers do. It is not uncommon for an Administrator to deny an application for registration as an investment adviser to a firm that does not appear to have the necessary qualifications. The Administrator will permit the firm to function as a broker/dealer, and resubmit its request for adviser status at a later time. While it is rare, the USA does reserve the right to require a potential registrant to submit to an oral examination in addition to or instead of a written test.
When the Administrator issues a cease and desist order,
A) the subject of the order may appeal to the proper court.
B) clients who purchased the affected securities must receive a prompt refund of the consideration paid.
C) it is tantamount to a suspension.
D) the subject of the order must promptly put
a halt to the specified activity.
Answer: D
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. There is nothing here to appeal - if requested in writing, the Administrator must agree to a hearing within 15 days of receipt.
A registration of an agent can be denied or revoked if it is in the public interest and:
a registrant fails to include the fact that he had been convicted of a nonsecurities-related misdemeanor within the last 2 years.
a registrant has willfully violated the securities laws of a foreign jurisdiction.
a registrant is qualified on the basis of knowledge and training but lacks requisite experience.
a registrant has engaged in dishonest or unethical practices in the securities business.
A) II and III.
B) III and IV.
C) II and IV.
D) I and II.
Answer: C
An Administrator may not deny a registration solely on the basis of lack of experience. An Administrator may deny, revoke, or suspend a registration if it is in the public interest and a registrant fails to include the fact that he has been convicted of a securities-related misdemeanor (or any felony) within the last 10 years. The Administrator may also deny a registration if a registrant has engaged in dishonest or unethical practices and it is in the public interest to deny the registration. Registration can also be denied if a registrant violated securities laws of a foreign country.
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.
A) II and III.
B) I and II.
C) I and III.
D) I, II and III.
Answer: A
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.
The Administrator could deny or revoke the registration of a broker/dealer if:
A) an officer of the firm was found to be in violation of SEC rules 22 years ago.
B) one of the firm's officers was convicted of a misdemeanor for being a scofflaw.
C) the major stockholder of the firm was convicted of a securities related misdemeanor 125 months ago.
D) the CEO has intentionally failed to file
advertising material with the Administrator.
Answer: D
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.
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.
A) II, III and IV.
B) II and III.
C) I and II.
D)
I and III.
Answer: B
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.
An Administrator may initiate a suspension or revocation proceeding against a broker/dealer registered in his state:
up to 2 years after a broker/dealer voluntarily withdraws its registration.
when an agent of the broker/dealer is convicted of a felony violation of the Securities Exchange Act of
1934.
upon discovery that the broker/dealer's license had been suspended in another state.
upon discovery of new facts unknown to the Administrator at the time of the broker/dealer's initial registration.
Answer: C
The Administrator maintains jurisdiction over a license that has been withdrawn for a period of 1 year after the effective date of the withdrawal. An action against an agent of the broker/dealer does not allow the regulatory authority to also go after the broker/dealer unless that agent is a principal of the broker/dealer or part of the ruling indicated that there was a failure to supervise. The broker/dealer must disclose all suspensions by other regulatory agencies, including other states, to the state Administrator of its own state. A broker/dealer must also provide full disclosure of all relevant facts to the state Administrator concerning its registration.
While the Administrator has great power, the USA does place some limitations on the office. Which of the following statements regarding those powers are TRUE?
In conducting an investigation, an Administrator can compel the testimony of witnesses.
Investigations of serious violations must be open to the public.
An Administrator in Illinois may only enforce subpoenas from South Carolina if the alleged violation would be a violation of the Illinois statutes.
An Administrator may deny the
registration of a securities professional who has been convicted of any felony within the past 10 years, but must provide a hearing within 15 days if requested in writing.
A) I and II.
B) II and III.
C) III and IV.
D) I, III and IV.
Answer: D
An Administrator can compel the testimony of witnesses when conducting an investigation. Investigation of serious violations need not be held in public. An Administrator in Illinois may enforce subpoenas from another state only if the alleged violation would also be a violation in his state as well. Conviction for any felony within the past 10 years is one of a number of reasons that the Administrator may have for denying a license. However, on notice of the denial, a written request may be made for a hearing and that request must be honored within 15 days.
There are several ways that a securities professional's registration can be terminated. Nonpunitive termination of a securities professional's registration could be done through:
cancellation.
suspension.
revocation.
withdrawal.
A) I and IV.
B) I and III.
C) II and III.
D) II and IV.
Answer: A
Cancellation and withdrawal are nonpunitive methods of termination of a person's registration. Suspension, revocation, and denial are considered forms of punishment.
The Administrator may deny an application for registration as an agent if:
the applicant has been convicted of a misdemeanor involving securities fraud within the past 120 months.
the applicant is insolvent.
the applicant has been convicted of a felony within 10 years of the date of application.
the applicant has filed an incomplete application.
A) I, II, III and IV.
B) I and III.
C) I, III and IV.
D) I and IV.
Answer: A
A record of any felony conviction or misdemeanors involving securities fraud during the last 10 years is sufficient grounds for the Administrator to deny an application for registration in the securities industry. Insolvency and failure to file a complete application are also grounds for denial.
Which of the following statements (is) are TRUE?
An Administrator can suspend a pending registration on a summary basis.
An Administrator may
not summarily issue a stop order without prior notice and opportunity for a hearing.
An Administrator may cancel a registration for the same reasons he revoked or suspended a registration.
A) I only.
B) II and III.
C) III only.
D) I and II.
Answer: D
An Administrator can, on a summary 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; it occurs when a registrant no longer exists, ceases to do business, is declared mentally incompetent, or cannot be located.
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.
A) I and II.
B) I and III.
C) I, II and III.
D) I only.
Answer: C
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, in order for the Administrator to suspend an agent's registration:
notice must be given of the proposed action and hearing
notification must be given to the employing broker/dealer of the final order
the agent must be presented with an opportunity for a hearing
no notice or hearing is required to issue a suspension
A) II and IV.
B) II, III and IV.
C) I, II and III.
D) I and III.
q
Answer: C
The Administrator may by order summarily postpone or suspend registration pending final determination of any proceeding the USA. 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.
An applicant for registration as an investment adviser discloses on Form ADV 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:
A) may
deny applications only on the basis of the limitations of the law.
B) is empowered to deny this application.
C) will request that the applicant furnish past performance records to determine whether this method of investment analysis has merit.
D) will probably turn to the SEC for guidance.
Answer: A
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. Although disclosure of methods of analysis is required, the Administrator is not empowered to pass judgment on those methods.
The Uniform Securities Act invests the office of the Administrator with a number of powers. However, the act does not permit the Administrator to:
A) issue a cease and desist order without prior notice.
B) insist that specific forms be used to register securities.
C) inspect offices
of registered broker/dealers without prior notice.
D) issue an injunction when there is evidence of wrongdoing.
Answer: D
Injunctions may be issued by a court of competent jurisdiction only.
The state securities Administrator has the authority to:
A) issue and enforce an injunction against a registered party.
B) make, amend, or rescind rules,forms, and orders necessary to administer the USA.
C) amend or alter the Uniform Securities Act.
D) issue a ruling under its authority with no requirement to publish that ruling.
Answer: B
A state securities Administrator 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 Uniform Securities Act itself. All rules and forms of the Administrator must be published. Only the courts can issue injunctions.
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 has the power to require witness oaths because an Administrative hearing is functionally a legal proceeding.
D) Yes, because the Administrator is empowered to administer oaths as provided in the Uniform Securities Act, as enacted in the Administrator's state of jurisdiction.
Answer: D
The USA empowers Administrators to administer oaths, Sworn oaths typically occur in conjunction with hearings.
While a student at college nine years ago, Joe was convicted of possession of marijuana (a misdemeanor in that state) and received a suspended sentence. Joe now resides in a different state where the same offense is a felony. If Joe disclosed the matter on his application to ABC Securities, Joe's registration may:
A) be denied based on this conviction because it was less than ten years ago.
B) not be denied based on this conviction because it was a misdemeanor in the state where he went to college.
C) not be denied based on this conviction because it was nine years ago.
D) be denied based on this conviction because the crime is a felony in the state where he seeks registration.
Answer: B
In this context, only a conviction for a felony within the past ten years may be grounds for denying a registration. Since the conviction does not show up on Joe's records as a felony, the fact that this state has different penalties for the same offence is irrelevant.
An applicant for registration as an IAR in this state was convicted 4 years ago of a nonfinancially 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) censure the investment adviser for even thinking of employing this individual.
B) treat the crime as a nonfinancial misdemeanor.
C) treat the crime as a nonfinancial felony.
D) treat the crime as any felony.
Answer: B
Even though the crime is a felony in the state where registration is being sought, the applicant's record shows a misdemeanor and, therefore, this individual would not be subject to statutory disqualification.
It is a violation of the Uniform Securities Act if an agent:
A) engages in honest or ethical business practices.
B) files a fraudulent application.
C) makes any material representation in the offer or sale of a security.
D) offers or sells any security unless it is registered.
Answer: B
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.
If an agent's registration is revoked for a violation of the Act, the Administrator may deny a future application submitted by the agent for:
agent.
broker/dealer.
investment adviser.
A) I only.
B) I and II.
C) II only.
D) I, II and III.
Answer: D
Once an agent's registration is revoked, any future applications for registration in the securities industry (as agent, broker/dealer, or investment adviser) may be denied.
A broker/dealer having no place of business in a state is not required to be registered in that state if the broker/dealer:
A) does no business in that state other than with institutional clients.
B) is a member of FINRA.
C) is a member of the New York Stock Exchange.
D) is licensed/registered in its state of residence.
Answer: A
A broker/dealer must be registered in every state it sells or offers to sell securities, unless an exemption is available. If a broker/dealer has no office in a particular state and no business is done in that state other than with institutional clients, registration there is not required.
Under the Uniform Securities Act, the Administrator has the power to:
administer oaths.
indict offenders.
subpoena witnesses.
take evidence.
A) I, II, III and IV.
B) I, III and IV.
C) I and III.
D) II, III and IV.
Answer: B
The Administrator has the power to administer oaths, subpoena witnesses and take evidence. The Administrator also has the power to compel testimony and require the production of books and records. However, while the Administrator is authorized to refer violations for possible criminal prosecution, the actual powers of criminal prosecution belong to others. For example, indicting offenders is the function of a grand jury.
Under the Uniform Securities Act, as a result of a hearing, the disciplinary actions that may be taken by the Administrator include which of the following?
Permanent revocation of a registration.
Bar from employment with any registrant.
Restriction on a registrant's performance of any activity in the advisory or brokerage business.
A) II and III.
B) I, II and III.
C) I and II.
D) I and III.
Answer: B
Once the registrant is found guilty at a hearing, the Administrator is authorized to take all of the above actions against a person's registration.
Under the Uniform Securities Act, in which of the following circumstances may the Administrator take action against an advisory firm?
Nine years ago, the Administrator of another state found that the president of the firm violated the securities laws of that other state.
The firm has liabilities that exceed its
assets.
A minority shareholder with no management role in an investment adviser organized as a corporation cannot meet his financial obligations as they come due.
A) I only.
B) II and III.
C) I, II and III.
D) I and II.
Answer: D
Violation of another state's securities laws within the past ten years by the president of the firm might be cause for action against an investment adviser. So is insolvency, defined as having liabilities in excess of one's assets or the inability to meet financial obligations as they come due. However, the personal financial situation of a minority, nonmanaging shareholder does not have a bearing on the financial situation of a corporate firm.
Under the Uniform Securities Act, the Administrator is required to provide which of the following in a disciplinary proceeding?
Appropriate prior notice.
Opportunity for a hearing.
Written
findings of fact and conclusions of law.
A) I and III.
B) III only.
C) I, II and III.
D) I and II.
Answer: C
In general, the Administrator must provide appropriate prior notice, opportunity for 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.
Before taking any disciplinary action with respect to a registration under the Uniform Securities Act, the Administrator must always do which of the following?
Obtain the approval of the appropriate state court.
Find that the action is in the public interest.
Cite a cause listed in the act.
A) II and III.
B) I and II.
C) I and III.
D) I, II and III.
Answer: A
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.
Under the Uniform Securities Act, which of the following would cause an agent's registration to be canceled by the Administrator?
The agent has died.
The agent is found by a
court to be mentally incompetent.
The agent cannot be located after reasonable search.
The agent is found by a court to have violated a securities statute.
A) I, II, III and IV.
B) I, II and III.
C) I only.
D) I and II.
Answer: B
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; the Administrator may revoke a registration for violations.
Under the Uniform Securities Act, which of the following concerning the withdrawal of an agent's registration is NOT true?
A) Absent any disciplinary proceedings, withdrawal is effective 30 days after application.
B) At the Administrator's discretion, disciplinary
proceedings may delay effectiveness of a withdrawal application indefinitely.
C) Disciplinary proceedings may be taken against an agent after the agent's withdrawal is effective.
D) Absent any disciplinary proceedings, withdrawal is effective 60 days after application.
Answer: D
Under the USA, withdrawals of registration are generally effective on the 30th day after filing, unless a disciplinary action is instituted. The Administrator may institute a revocation or suspension proceeding within one year after an agent's withdrawal has become effective.
Under the Uniform Securities Act, the Administrator is given the power to:
examine files of registered persons who have their offices out of state.
designate an officer who will then have the power to take evidence regarding investigations.
sentence willful violators to up to three years in prison.
A) I and III.
B)
II and III.
C) I, II and III.
D) I and II.
Answer: D
The Administrator may examine files of any registered person, whether located in the state or out of state. The Administrator may invest a designated officer with the power to conduct formal investigations: subpoena witnesses, compel testimony, etc. But while the Administrator may refer evidence for criminal prosecution, only a court may sentence a person convicted of a violation.
Under the Uniform Securities Act, violations of the act may result in all of the following EXCEPT:
A) an arrest being made by the Administrator.
B) A receiver being appointed over the violator's assets.
C) A court order requiring the violator to make restitution to others.
D) A bar from employment in the securities business.
Answer: A
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..
Under the Uniform Securities Act, which of the following is NOT a reason for canceling an agent's registration?
A) The agent has ceased to do business as an agent.
B) The agent has engaged in an unethical business practice.
C) The agent has been found by a court to be mentally incompetent.
D) The agent cannot be located after a reasonable search.
Answer: B
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, an Administrator who believes a violation has occurred or is about to occur may
issue a cease and desist order
without a prior hearing
bring action to obtain an injunction and have a receiver appointed over the alleged violator's accounts
seek a court order requiring the alleged violator to make restitution to others
A) I, II and III
B) I and II
C) I and III
D) II and III
Answer: A
Whenever it appears to the Administrator that any person has engaged or is about to engage in any act or practice constituting a violation of any provision
of the Uniform Securities Act or any rule or order, he may in his discretion bring either or both of the following remedies:
issue a cease and desist order, 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; or
bring an action in the appropriate court to enjoin the acts or practices to enforce compliance with this act or any rule or order hereunder. Upon a proper showing, a
permanent or temporary injunction will be granted and a receiver or conservator may be appointed for the defendant or the defendant's assets. In addition, upon a proper showing by the Administrator the court may enter an order of rescission, restitution or disgorgement directed to any person who has engaged in any act constituting a violation of any provision of this act or any rule or order hereunder.
Under the Uniform Securities Act, which of the following statements are TRUE about the authority of an Administrator?
A cease and desist order may be issued prior to a hearing.
A cease and desist order may be issued after a hearing.
A cease and desist order is valid for a maximum of 30 days.
A) I and II.
B) I only.
C) II and III.
D) I, II and III.
Answer: A
In issuing a cease and desist order, the Administrator may provide prior notice and hearing or may issue the order without prior notice or hearing (summarily). There is no time period associated with the order.
When an Administrator acts summarily to postpone or suspend a registration of a security, which of the following statements is (are) TRUE under the Uniform Securities Act?
The suspension will not go into effect until after a hearing.
The registrant must be promptly notified of the action and given an opportunity for a hearing.
A hearing
must be held within 15 days of written request of the registrant.
A) I only.
B) I and III.
C) I, II and III.
D) II and III.
Answer: D
Acting summarily means acting without prior notice. An Administrator who has grounds may postpone or suspend a registration by issuing a stop order. The registrant must be promptly notified of the action and of the opportunity for a hearing. The hearing must be held within 15 days of a written request, and the suspension will remain in effect until final disposition.