Administration of the USA

Question 1

What are the justifiable reasons for denying an individual’s registration? 2

Answer 1

1. Conviction for any felony (any time) or

2. securities-related misdemeanor within the last 10 years

Question 2

True or False: A gift of assessable stock is considered both an offer and sale.

Answer 2

True

Question 3

Is the payment of a stock dividend considered an offer or sale?

Answer 3

No

Question 4

Is the conversion of a bond into stock considered an offer or sale?

Answer 4

No

Question 5

If shares of stock are freely given with the purchase of a bond, is this considered an offer and sale?

Answer 5

Yes

Question 6

True or False: An Administrator may issue a cease-and-desist order before a violation has occurred.

Answer 6

True

Question 7

Administrative cease-and-desist orders may be appealed in a state court if application is made within _____ days.

Answer 7

Administrative cease-and-desist orders may be appealed in a state court if application is made within 60 days.

Question 8

An ________ is any attempt or solicitation to acquire or dispose of a security for value.

Answer 8

An offer is any attempt or solicitation to acquire or dispose of a security for value.

Question 9

A _______ is any agreement or contract to dispose of a security for value.

Answer 9

A sale is any agreement or contract to dispose of a security for value.

Question 10

True or False: Registration may be denied due to ANY misdemeanor convictions.

Answer 10

False. Registration may be denied for ANY felony conviction or securities-related misdemeanor conviction.

Question 11

If an offer is made using television or radio, where is the offer considered to have been made?

Answer 11

In the state in which the broadcast or telecast originated

Question 12

If an offer is made using the mail, where is the offer considered to have been made?

Answer 12

In the state from which it originated and the state to which it is directed

Question 13

With newspaper offers, no offer is made if more than __________ of the circulation is outside of the publishing state.

Answer 13

With newspaper offers, no offer is made if more than two-thirds of the circulation is outside of the publishing state.

Question 14

Under what situations may the Administrator cancel a registrant’s registration? 4

Answer 14

If the registrant has

1. died,
2. ceased doing business,
3. been declared mentally incompetent or
4. cannot be located

Question 15

True or False: A stock dividend is considered a sale.

Answer 15

False

Question 16

May the Administrator levy fines on a registrant?

Answer 16

No

Question 17

When will an offer fall under an Administrator’s jurisdiction?

Answer 17

If the offer originated in, was directed in, or was accepted in the Administrator’s state

Question 18

If the Administrator believes a person has violated or is about to violate the USA, may a stop order be issued?

Answer 18

Yes

Question 19

Does the Administrator require proof of wrongdoing to initiate an investigation?

Answer 19

No, but she does need to be able to refer to a rule or order when starting the investigation.

Question 20

When conducting an investigation of wrongdoing, is the Administrator limited to state boundaries?

Answer 20

No. The Administrator may subpoena books, records, and witnesses from inside and outside the state.

Question 21

If found civilly liable for violating the USA, what is the penalty? 5

Answer 21

1. The original amount paid, 
plus 
2. the legal rate of interest, 
3. attorney fees, and 
4. court costs, 
5. minus any cash received

Question 22

The appeal of an administrative order is made before a court of _________________________.

Answer 22

The appeal of an administrative order is made before a court of competent jurisdiction (state court).

Question 23

Does the appeal of an administrative order act as a stay of the order?

Answer 23

No. The order remains in effect until the outcome of the hearing.

Question 24

What is a letter of rescission?

Answer 24

An offer to buy back a security from a client when that security was sold in violation of the USA

Question 25

A customer must respond to a letter of rescission within _____ days or lose the right to sue.

Answer 25

A customer must respond to a letter of rescission within 30 days or lose the right to sue.

Question 26

True or False: The Administrator may bring a case in a civil court.

Answer 26

True. Both the Administrator and a private citizen may bring a case in civil court.

Question 27

Define jurisdiction.

Answer 27

The power to interpret and apply the law or the territorial range of authority or control.

Question 28

An _______ is any attempt or solicitation to dispose of a security for value.

Answer 28

An offer (offer to sell) is any attempt or solicitation to dispose of a security for value.

Question 29

Can a BD punish one of its agents for responding to a subpoena?

Answer 29

No. This is a prohibited action.

Question 30

True or False: An individual may be denied registration due to lack of experience.

Answer 30

False. However, a lack of training, knowledge, and experience may be grounds for denial.

Question 31

If an agent has withdrawn registration, the Administrator may still take action for ___ year(s) after the withdrawal.

Answer 31

If an agent has withdrawn registration, the Administrator may still take action for one year after the withdrawal.

Question 32

A prospectus is mailed by an agent in one state to a client in another state. In which state(s) is the offer being made?

Answer 32

Both states

Question 33

Under the Uniform Securities Act, the statute of limitations for fraud is ____ years.

Answer 33

Under the Uniform Securities Act, the statute of limitations for fraud is five years.

Question 34

The statute of limitations for criminal violations of the Uniform Securities Act is ____ years.

Answer 34

The statute of limitations for criminal violations of the Uniform Securities Act is five years.

Question 35

May an Administrator subpoena records in another state to investigate potential violations that occurred in his own state?

Answer 35

Yes, the Administrator has broad inspectorial power, which stretches beyond his own state.

Question 36

May the books and records of a federal covered adviser be subject to inspection by an Administrator?

Answer 36

Yes

Question 37

True or False: An Administrator may cancel a registration without the opportunity for a hearing.

Answer 37

True. Cancellation may be due to the death of an agent or a firm no longer being in business.

Question 38

If a cease-and-desist order is issued against an agent, the agent may file an appeal within _____ days.

Answer 38

If a cease-and-desist order is issued against an agent, the agent may file an appeal within 60 days.

Question 39

Is being charged with a felony or securities-related misdemeanor grounds for statutory disqualification?

Answer 39

No. Statutory disqualification is due to conviction for any felony or securities-related misdemeanor in the past 10 yrs.

Question 40

True or False: The exercise of convertible securities is considered a sale under the USA.

Answer 40

False

Question 41

True or False: A warrant attached to the sale of a bond is considered a sale of the warrant.

Answer 41

True

Question 42

May the Administrator initiate criminal or civil liability action against a registrant?

Answer 42

Yes. An Administrator may initiate action, but may not impose fines or penalties for violations.

Question 43

True or False: A gift of non-assessable stock is considered a sale.

Answer 43

False. However, the gift of assessable stock IS considered both an offer and a sale.

Question 44

If the Administrator believes a person has violated or is about to violate the USA, may he issue an injunction?

Answer 44

No. The Administrator may not issue an injunction. Injunctions may only be issued by a court of competent jurisdiction.

Question 45

The maximum criminal penalty for violations of the USA is _____ years in prison and/or up to a $______ fine.

Answer 45

The maximum criminal penalty for violations of the USA is three years in prison and/or up to a $5,000 fine.

Question 46

Define assessable stock.

Answer 46

Stock that allows the issuing entity to demand additional funds from existing stockholders

Question 47

True or False: The Administrator may issue an injunction.

Answer 47

False. Only a court may issue an injunction; however, the Administrator may issue a cease and desist order.

Question 48

When a broker-dealer has filed an application to withdraw its registration, when will it become effective?

Answer 48

When the Administrator determines whether there is an action for revocation of the firm’s license pending at the time the application was filed.

Question 49

What could result in a denial of a broker-dealers application for registration with the Administrator?

Answer 49

-Any action for a foreign securities regulator may result in a denial

Question 50

An agent offered and sold an unregistered, nonexempt security to several of his clients in State A. These clients subsequently lost a considerable amount of money in this investment. Under the Uniform Securities Act what can the clients do?

Answer 50

The clients may initiate a civil lawsuit to recover their losses

Question 51

What action may the state securities Administrator take without giving the registrant an opportunity for a hearing?

Answer 51

Cancel a registration

Question 52

What actions fall under the jurisdiction of a state securities Administrator?

Answer 52

1. The purchase of options through the Internet by a state resident
2. The offer of securities by an out-of-state broker to a resident of the state.