A state Administrator can suspend your registration before you ever get a hearing. Under the tested text, though, it cannot fine you a dollar or jail you on its own. Many exam questions turn on three things: which powers the Administrator holds, which need a court, and which belong to the investor.
The Administrator is the official or agency that enforces a state's securities law. The exam tests the Uniform Securities Act (USA) of 1956 as amended by the North American Securities Administrators Association (NASAA). Under it, the Administrator writes rules, gathers facts and acts by order in noncriminal administrative proceedings. Some actions need force, such as jail, a court-ordered refund or punishment for contempt, and a court supplies it. Investors can also sue on their own.
Rulemaking fills the gaps the statute leaves. Under Section 412, the Administrator may make, amend and rescind rules, forms and orders needed to carry out the Act. It may define terms, even terms the Act never uses, as long as the definitions don't contradict the Act.
Common mistakes
- Giving the Administrator fines or jail: Under the 1956 text it imposes neither. The criminal maximum is $5,000, three years or both (not $10,000), and only a court imposes it after a prosecutor charges.
- Only cease and desist is summary: Summary postponements or suspensions of registrations and securities registrations, and summary exemption denials, also skip the prior hearing. Each gets a hearing within 15 days of a written request.
- Calling cancellation hearing-free: Section 204(f) excuses only summary postponements or suspensions. Cancellation still needs notice, a hearing chance and written findings.
Bottom line
- Rules, forms and orders need a finding that the action is necessary or appropriate in the public interest or for investor protection; good-faith reliance on a rule later held invalid creates no liability.
- Registration orders need a public-interest finding plus a ground: felonies or securities misdemeanors within 10 years, other-state willful-violation findings within 10 years, foreign regulator or SRO sanctions within five years, and injunctions or orders only while in effect.
- Every Section 204 order needs notice, a hearing chance and written findings, except a summary postponement or suspension, which gets a hearing within 15 days of a written request.
- Withdrawal takes effect 30 days after receipt unless a proceeding is pending or begins within 30 days; willful violations can still be pursued for one year after.
Exam shortcut
When a question names a remedy, first ask who is acting. If the answer choice says the Administrator alone will "fine," "imprison" or "hold in contempt," eliminate it. If the stem says the Administrator acted "without a hearing," check whether the order is a cease and desist order, a summary postponement or suspension, or a summary exemption denial. Anything else needs notice, a hearing chance and written findings.
The full lesson (about 4,474 words, 30 min read) adds 2 worked examples, all 6 common mistakes, a self-check, free in the app.
Learning objectives
- D35
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