Ch. 8 Flashcards
T/F: If FINRA issues an order against a firm, an Administrator may take action against a BDs registration.
T
T/F: Registration denial orders issued by an Administrator are final, binding, and may not be appealed.
F; If denied, a person is entitled to written notification and findings or fact and an opportunity for a hearing
The appeal of an administrative order is made before a court of ___________.
Competent jurisdiction (state court)
T/F: The Administrator may enjoin (issue an injunction) a registered individual or firm.
F; the Administrator may only issue a cease and desist order. The Administrator may not issue an injunction.
A customer must respond to a letter of rescission within _____ days or lose the right to sue.
30
If a cease and desist order is issued against an agent, the agent may file an appeal within ______ days.
60
The maximum criminal penalty for violations of the USA is _____ years in prison and/or up to a $_____ fine.
Three; $5,000
Is being charged with a felony or securities related misdemeanor grounds for statutory disqualification?
No. Statutory disqualification is due to conviction for any felony or securities related misdemeanor in the past 10 years.
T/F: Registration may be denied due to ANY misdemeanor convictions.
F; Registration may be denied for ANY felony conviction or securities related misdemeanor conviction
What is a letter of rescission?
An offer to buy back a security from a client when that security was sold in violation of the USA
What are some reasons for the Administrator denying the registration statement for a securities offering?
Filing false registration documents, issues business is illegal, spread is unfair, or failing to pay the filing fee
T/F: Administrators are permitted to use summary orders denying certain exemptions.
T
Define assessable stock.
Stock that allows the issuing entity to demand additional funds from existing stockholders
Define jurisdiction
The power to interpret and apply the law or the territorial range of authority or control.
Administrative cease and desist orders may be appealed in a state court if application is maker within _____ days.
60
If the Administrator believes a person has violated or is about to violate the USA, may he issue an injunction?
No. The Administrator may not issue an injunction. Injunctions may only be issued by a court of competent jurisdiction.
T/F: An Administrator may not retroactively enforce orders and revocations.
T
If an agent has been enjoined (forced to cease activity) and hearing is requested, when must the hearing be held?
With 15 days of the receipt of a written request from the agent
A registration withdrawal is effective _____ days after filing.
30
If the Administrator believes a person has violated or is about to violate the USA, may a stop order be issued?
Yes.
T/F: A gift of assessable stock is considered both an offer and sale.
T
May the Administrator revoke the registration of a federally coveted adviser?
No. However, she may require the IA to notice file
A prospectus is mailed by an agent in one state to a client in another state. I’m which state(s) is the offer being made?
Both states
At the state level, who may appoint an officer to lead an investigation?
The Administrator
If a client has been defrauded by an BD or IA, the firm may be required to ______ commissions/fees.
Disgorge
May the Administrator levy fines on a registrant?
No
T/F: The Administrator may confiscate records.
F; the Administrator may inspect records, but cannot confiscate them
T/F: The exercise of convertible securities is considered a sale under the USA.
F
If an agent has withdrawn registration, the Administrator may still take action ___ year(s) after the withdrawal.
One
If found civilly liable for violating the USA, what is the penalty?
The original amount paid, plus the legal rate of interest, attorney fees, and court costs, minus any cash received
The statute of limitations for criminal violations of the USA is ____ years.
Five
T/F: A gift of non assessable stock is considered a sale.
F; however, the gift of assessable stock IS considered both an offer and a sale.
A _______ is any agreement or contract to dispose of a security for value.
Sale
A person may appeal a stop order that is issued by the Administrator within ____ days.
60
Under the provisions of the USA, a hearing will be held _____ days after a written request.
15
For how long does the Administrator maintain jurisdiction over a registrant after a withdrawal of registration?
One year
What are the justifiable reasons for denying an individuals registration?
Conviction for any felony or securities related misdemeanor within the last 10 years
If a client has been defrauded by her BD or IA, what cost may she sue to recover?
The cost of the security or the cost of the advice, commissions, legal fees, interest, less any income received
The administrator has the power to issue a ______ ______ ________ order, but not an ________.
Cease and desist; injunction.
The statute of limitations for criminal violations of the USA is _____ years.
Five
When conducting an investigation of wrongdoing, is the administrators limited to state boundaries?
No. The administrator may subpoena books, records, and witnesses from inside and outside the state.
May an Administrator subpoena records in another state to investigate potential violations that occurred in his own state?
Yes, the Administrator has broad inspectorial power, which stretched beyond his own state
Is the conversion of a bond into stock considered an offer or sale?
No
T/F: An Administrator may issue a cease and desist order before a violation has occurred.
T
T/F: An Administrator may cancel a registration without the opportunity for a hearing.
T; cancellation may be due to the death of an agent or a firm no longer being in business
Does the Administrator require proof of wrongdoing to initiate an investigation?
No, but she does need to be able to refer to a rule or order when starting the investigation.
When is an offer subject to a specific states securities laws?
When it originated in, is directed to and received in, or is accepted in the state
T/F: The Administrator may bring a case in a civil court.
T; both the Administrator and a private citizen may bring a case in civil court
If shares of stock are freely given with the purchase of a bond, is this considered an offer and sale?
Yes
T/F: An Administrator is not required to provide written findings of fact when revoking a registration
F; the Administrator must provide written notification, written findings of fact, and an opportunity for a hearing.
Can a BD punish one of its agents for responding to a subpoena?
No. This is a prohibited action
T/F: An individual may be denied registration due to lack of experience.
F; however, a lack of training, knowledge, and experience may be grounds for denial
If an offer is made using television or radio, where is the offer considered to have been made?
In the state in which the broadcast or telecast originated
T/F: The Administrator may issue an injunction
F; only a court may issue an injunction; however, the Administrator may issue a cease and desist order.
May the Administrator initiate criminal or civil liability action against a registrant?
Yes. An Administrator may initiate action, but may not impose fines or penalties for violations.
T/F: A warrant attached to the sale of a bond is considered a sale of the warrant.
T
T/F: To revoke registration, Administrators must send registrants all documents created in the investigation.
F; the Administrator must provide written findings of fact. However, providing all documents is not required
Under the USA, the statute of limitations for fraud is ____ years.
Five
Is the payment of a stock dividend considered an offer or sale?
No
An ____________ is any attempt or solicitation to acquire or dispose of a security for value.
Offer
T/F: An Administrator may require a mutual fund to file its advertising
F; mutual fund advertising is filed with FINRA, not the Administrator
Does the appeal of an administrative order act as a stay of the order?
No. The order remains in effect until the outcome of the hearing.
If an offer is made using the mail, where is the offer considered to have been made?
In the state from which it originated and the state to which it is directed
When will an offer fall under an Administrators jurisdiction?
If the offer originated in, was directed in, or was accepted in the Administrators state
With newspaper offers, no offer is made if more than _________ of the circulation is outside of the publishing state.
Two-thirds
May the books and records of a federal covered adviser be subject to inspection by an Administrator?
Yes
Statute of limitations for USA civil violations is _____ yrs. of occurrence or ____ yrs. of discovery, whichever is first.
Three; two
An ________ is any attempt or solicitation to dispose of a security for value.
Offer (offer to sell)
T/F: A stock dividend is considered a sale.
F
T/F: An agent may be arrested by the Administrator for refusing to cooperate with an investigation.
F; the Administrator does not have the authority to arrest a person who violates state law
A person subject to an order by an Administrator may appeal the order to the state court within ______ days.
60
When may the Administrator cancel a registrants registration?
If the registrant has died, ceased doing business, been declared mentally incompetent or cannot be located
How may the failure to pay the proper filing fee be corrected?
By paying the appropriate amount
May the Administrator audit the books and records of a registered firm?
Yes. The Administrator may subpoena, audit, and inspect the books and records of registered firms.
What action may an Administrator take on receipt of a complaint regarding an ad that originated from another state?
Investigate the complaint
