Chapter 7 - Administration of the USA

Question 1

True or False: The Administrator has jurisdiction over every offer or sale that’s made or accepted in the Administrator’s state.

Answer 1

True

Question 2

An ______ is any attempt to dispose of a security for value.

Answer 2

Offer

Question 3

A ______ is any agreement or contract to sell a security.

Answer 3

Sale

Question 4

Does this include both an offer and a sale? Any security given or delivered with, or as a bonus for, the purchase of a security or any other item (e.g., warrants attached to a bond purchase).

Answer 4

Yes

Question 5

Does a gift of assessable stock* (the USA requires disclosure of material facts about the stock) include both an offer and a sale?

Answer 5

Yes

Question 6

True or False: A gift of non-assessable stock is neither an offer
nor sale and is therefore not subject to the Act.

Answer 6

True

Question 7

An offer is considered to be made in an Administrator’s state if it:

Answer 7

*Originated in the state
*Was directed into and received in the state to which it was directed
*Accepted or transacted in the state

Question 8

Which State has jurisdiction over US Mail or Telephone?

Answer 8

Two States at most
1. The state from which an offer originates
2. The state to which it was directed and received
**For mail, not the state to which it may be forwarded

Question 9

Which State has jurisdiction over Television or Radio?

Answer 9

One State only
* The State in which the camera or microphone is located

Question 10

Which State has jurisdiction over Newpaper or Magazine?

Answer 10

One State or No State
* The State in which it’s published, unless more than 2/3rds of the circulation is outside of the State

Question 11

The Administrator may, in the public interest:

Answer 11

*Deny, suspend, or revoke registration of a firm or employee
*Bar an employee from association with any registered firm
*Limit the activities of a registrant
But MAY NOT levy fines or impose prison sentences directly

Question 12

What is one justification for Statutory Disqualification?

Answer 12

Providing false or misleading information on applications.

Question 13

What type of conviction can lead to Statutory Disqualification?

Answer 13

Conviction of any felony or a misdemeanor involving the securities industry.

Question 14

How can a court action result in Statutory Disqualification?

Answer 14

Prohibition by any court from engaging in securities activities.

Question 15

What foreign jurisdiction action can lead to Statutory Disqualification?

Answer 15

Willfully violating securities laws of any foreign jurisdiction within the past five years.

Question 16

How can financial status affect Statutory Disqualification?

Answer 16

Insolvency can lead to Statutory Disqualification.

Question 17

What administrative failure can result in Statutory Disqualification?

Answer 17

Failure to pay the proper filing fee.

Question 18

How can lack of qualification lead to Statutory Disqualification?

Answer 18

Lack of qualification on the basis of training, experience, and knowledge of the securities business.

Question 19

What powers do Administrators have when investigating violations?

Answer 19

Administrators have broad inspectorial powers.

Question 20

Can Administrators require statements under oath from witnesses?

Answer 20

Yes, they can require statements under oath from witnesses inside and outside of the state.

Question 21

Are Administrators able to subpoena records in any state?

Answer 21

Yes, Administrators can subpoena records in any state.

Question 22

What legal action can Administrators initiate?

Answer 22

Administrators can initiate criminal liability action.

Question 23

How do Administrators cooperate with one another?

Answer 23

Administrators cooperate regarding access to records and conducting investigations.

Question 24

What action can the Administrator take if violations have occurred or may occur?

Answer 24

The Administrator may issue a cease-and-desist order.

Question 25

Within how many days can orders be appealed in state court?

Answer 25

Orders may be appealed within 60 days.

Question 26

Do appeals act as a stay of the order?

Answer 26

No, appeals do not act as a stay of the order.

Question 27

What can the Administrator request from a court if necessary?

Answer 27

The Administrator may ask a court to issue an injunction.

Question 28

True or False: Client information is confidential, and firms may only release it if required to do so by law or if
the client’s approval is received.

Answer 28

True

Question 29

True or False: If registration is denied, suspended, or revoked by the Administrator, the registrant must be notified in writing, provided
written findings of fact and given an opportunity for a hearing.

Answer 29

True
*If requested, a hearing must be held within 15 days.

Question 30

True or False: An Administrator may not cancel a registration if an individual has died, been deemed mentally incompetent, or cannot be located after reasonable search.

Answer 30

False

Question 31

A firm’s registration will be canceled if it’s gone out of business?

Answer 31

True

Question 32

What can a client do if securities are sold in violation of the USA or if advice was fraudulent or unethical?

Answer 32

The client has a “right of action” and may sue in civil court.

Question 33

What can a client recover if they sue in civil court for securities sold in violation of the USA or fraudulent/unethical advice?

Answer 33

The client can recover the original consideration (purchase price) or any loss due to the advice, plus interest, plus court costs and reasonable attorney’s fees, minus any income received from the security/advice.

Question 34

What does “original consideration” refer to in the context of a civil lawsuit for securities violations or fraudulent advice?

Answer 34

“Original consideration” refers to the purchase price of the security.

Question 35

What additional costs can a client recover in a civil lawsuit for securities violations or fraudulent advice?

Answer 35

The client can recover interest, court costs, and reasonable attorney’s fees.

Question 36

What must be deducted from the recovery amount in a civil lawsuit for securities violations or fraudulent advice?

Answer 36

Any income received from the security/advice must be deducted from the recovery amount.

Question 37

True or False: A person who suffers damage or injury from the bad acts and even
accidents of others can seek
financial remedies in a civil court.

Answer 37

True

Question 38

The Statute of limitations for civil liabilities is ____ years from the occurrence or ___ years from the discovery, whichever comes first.

Answer 38

3; 2

Question 39

What is a Letter of Rescission in the context of civil liabilities?

Answer 39

A letter of rescission is tendered by an agent who discovers a violation of the USA, offering to buy back the security plus interest, minus any income received.

Question 40

What must an agent offer in a letter of rescission?

Answer 40

The agent must offer to buy back the security plus interest, minus any income received.

Question 41

How long does a customer have to respond to a letter of rescission?

Answer 41

A customer has 30 days to respond.

Question 42

What happens if a customer fails to respond to a letter of rescission within 30 days?

Answer 42

The customer waives her right to sue.

Question 43

Can a customer who receives a letter of rescission after selling the security still initiate civil action?

Answer 43

Yes, a customer who receives a letter of rescission after selling the security may still initiate civil action.

Question 44

Any person who willfully violates any provisions of the ______ Act may be subject to criminal penalties, which are _____ years in prison, or $________ fine, or both. However, if an agent had no knowledge of the violated, they may avoid a prison sentence. The statute of limitations if ___ years.

Answer 44

Uniform Securities Act, three years, $5,000, five years