Chapter 3: Remedies and Administrative Provisions - A. Authority of State Securities Administrators Flashcards
Authority of State Securities Administrator
The Uniform Securities Act (USA) empowers the administrator to amend or rescind any rule that is deemed necessary to carry out the provisions of the Act. The administrator also monitors and directs the state’s securities laws. A final order issued by the administrator or a rule adopted by the Act may be subject to a judicial review in accordance with the state administrative procedure act. The only provisions of the Act that the administrator cannot change are those relating to defined exempt securities.
For example: a public utility issues a bond in state X, and wants to sell it to a pension fund in state Y. Public utility stocks are exempt from registration, and a sale to a pension fund with more than $5 million is an exempt transaction. An administrator may not impose registration requirements or other solicitation hurdles because the bond is an exempt security. But remember, an administrator always has jurisdiction if fraud is involved.
Jurisdiction
The Uniform Securities Act (USA) gives the state administrator jurisdiction over any offer to buy or sell, or any acceptance of the offer, when the following conditions exist:
- The transaction was effected or accepted in the state; or
- The offer was directed (originated) from the state or directed into the state.
An offer can be made either orally or in writing. The Act gives these provisions a broad scope. This same broad scope also applies to investment advice.
Application example: Let’s say the agent is located in Michigan and his client resides in Ohio. The agent makes an offer to sell securities while the client was at home in Ohio; however, the client was not ready to accept the offer at that time. The client then leaves for vacation, and decides to purchase securities while in Tennessee, so he accepts the offer. The client does not mail the check, however, until arriving to Florida, his final vacation destination. Which state administrator(s) would have jurisdiction over this transaction?
The answer is Michigan, Ohio, and Tennessee: Michigan, because that’s the state where the agent is located; Ohio, because that’s where the offer originated, and Tennessee, because that’s where the offer was accepted. Florida, however, would not have jurisdiction over the transaction because it is unimportant what state the check was mailed from.
State
state is defined as any state, territory, or possession of the United States, District of Columbia, or Puerto Rico.
