Chapter 3 - Administrative Actions

Question 1

True or False: An administrator can investigate either publicly or privately, any prospective violation of securities law within the administrator’s jurisdiction. Such investigations can take place at any time and can take place both inside and outside of the administrator’s state.

Answer 1

True

Question 2

The Administrator has authority over a person when the person is:

Answer 2

1.Registered in the state 2. Transactions were executed in the state 3. The action(s) affect persons in the administrator’s state.

Question 3

The administrator may administer oaths, subpoena witnesses, take evidence, require documents or records which are relevant to any inquiry even if they are confidential and arrest, enjoin, or indict individuals and confiscate property.

Answer 3

False. Admins cannot directly arrest, enjoin or confiscate property

Question 4

True or False: Failure to obey any order may be punished by the court as contempt of court.

Answer 4

True

Question 5

True or False: Initial administrative actions will generally take place in states other than where the violations took place or where the firm is registered. Later, if the administrator takes actions, such as revocation of registration, then other states will not take similar actions.

Answer 5

False. Other states may also choose to take similar actions.

Question 6

The administrator may, if it appears a violation of any provisions of the USA has or is about to occur may issue a _________________ without a prior hearing.

Answer 6

Cease and Desist

Question 7

_____________ refers to the right of a customer to undo a securities transaction that was conducted in violation of the Uniform Securities Act. This means the customer can return the security and receive their original investment back, along with a reasonable rate of interest. Essentially, it allows the customer to be restored to their financial position before the transaction occurred.

Answer 7

Rescission

Question 8

_______________ refers to the requirement for a broker-dealer or agent to return commissions earned through illegal or unethical activities. This legal remedy is intended to prevent unjust enrichment and to make the affected parties whole again. This process is often ordered by regulatory bodies like the SEC and involves repaying the ill-gotten gains, often with interest.

Answer 8

Disgorgement of commissions

Question 9

Any person who willfully violates any provision of the USA shall, upon conviction, be fined not more than $__________ or imprisoned not more than ____ years, or both. No indictment or information may be returned more than ___ years after the alleged violation.

Answer 9

$5,000; 3; 5. An agent is not relieved of the violation even if the customer agrees to waive the violation.

Question 10

No person may sue more than __ years after the contract of sale or the rendering of investment advice, or ____ years after the discovery of the facts constituting the violation, whichever occurs first.

Answer 10

3 years; 2 years

Question 11

True or False: Buyers may sue to recover the consideration paid for the security, plus interest from the date of the payment as well as costs and reasonable attorney’s fees, less the amount of any income received.

Answer 11

True. Generally, no punitive damages, including double and treble damages are awarded with relation to violations of the USA. Example, a careless or incompetent RR places incorrect trade orders.

Question 12

True or False: Any person (IA, BD, or agent) may avoid civil liability by offering to refund the purchase price plus interest if the offer is made prior to the filing of a lawsuit.

Answer 12

True.

Question 13

True or False: The burden of proof for false or misleading information falls on the registrant.

Answer 13

True. The burden of proof for false or misleading information typically falls on the registrant. This means that the registrant must demonstrate that the information provided is accurate and not misleading.

Question 14

True or False: The administrator may by rule adopt exemptions from registration requirements if such exemptions are consistent with public interest and with the purposes fairly intended by policy and provisions of the act.

Answer 14

True

Question 15

True or False: The administrator may not revoke or deny certain exemptions by rule or order without giving prior notice to those who were previously exempt, and without giving prior notice to other regulators.

Answer 15

False. They may revoke or deny.

Question 16

All rules and forms of the administrator shall be published and need to be amended only when they are changed.

Answer 16

True

Question 17

All records required to be kept may not, at any time, be examined by the administrator within or outside of a state.

Answer 17

False. They may be examined at ANY time.

Question 18

Orders by administrators may be appealed in court within ____ days after the order is issued.

Answer 18

60

Question 19

True or False: The administrator may, by rule or order, prescribe the form and content of financial statements.

Answer 19

True. All financial statements must be prepared in accordance with generally accepted accounting principles.

Question 20

The burden of proving an exemption or an exception from a rule is on the ______________.

Answer 20

person claiming it. Not on the Administrator.

Question 21

True or False: An IA has an opportunity for a hearing only while an investigation is going on.

Answer 21

False. It is only when a proceeding is actually taking place.

Question 22

In any disciplinary proceeding where denial, suspension, or revocation of an IA or BDs registration may occur, the admin is required to provide the applicant or registrant with:

Answer 22

a. appropriate prior notice b. opportunity for a hearing c. written findings of fact and conclusions

Question 23

True or False: When investigating a potential violation or examining a firm’s books and records, the administrator does need to provide appropriate prior notice, opportunity for a hearing, or written findings of facts.

Answer 23

False. They do not need to provide appropriate prior notice. These are only required during disciplinary proceedings.

Question 24

True or False: The administrator may not institute a suspension or revocation proceeding based Soley on lack of experience if the applicant or registrant is qualified by training or knowledge.

Answer 24

True