Chapter 8 Part 3 Flashcards
Since Administrators are not officers of the court, they may not
compel compliance with a cease and desist order. However, if an offender fails to comply with the order, the Administrator may bring action in a competent comt (one having jurisdiction) to request a permanent or temporary injunction or restraining order. The Administrator may also seek an injunction without first issuing a cease and desist order
Remember, Administrators may seek an injunction, but the injunction must be issued by
a court of competent jurisdiction. As previously mentioned, failure to obey the court’s orders is punishable as contempt of court
An existing registration may be cancelled if the Administrator determines that a registered person is
no longer living, has ceased to do business, has been found to be mentally incompetent, or cannot be located after a reasonable search
Individuals may choose to withdraw their registration in a state simply because they
no longer intend to conduct business in that state. Withdrawals from registration become effective 30 days after the filing of an application to withdraw. If there are revocation or suspension proceedings pending at the time the withdrawal is filed, the withdrawal becomes effective at such time as the Administrator declares
The Administrator has the ability to institute proceedings for
one year following the effective date of a withdrawal. Therefore, registrants arc not able to avoid punishment for violations that have not yet become known.
A firm may also decide to withdraw its registration. If the firm’s withdrawal application has been filed and determined effective, the firm must reregister in order to
do business. In addition, when a broker-dealer withdraws its registration, its agents’ registrations are no longer valid. An agent’s registration is only effective when employed by a properly registered broker-dealer
Civil court is used when
customers seek remedies for monetary damages from alleged violations of the securities acts. State Administrators may also bring civil cases to court to seek injunctions (court orders) preventing persons from violating the USA. Courts may order defendants to disgorge profits or remunerations unlawfully earned, based on al Administrator’s request
Only a government official may bring
criminal proceedings based on violations of a securities act. Such proceedings are conducted in a court of competent jurisdiction (i.e., a court oflaw). Although Administrators have the authority to investigate securities violations and may issue cease and desist orders, they must request the attorney general or local district attorney to begin criminal proceedings.
Under certain conditions, a person who has purchased securities that were sold in violation of the Uniform Securities Act may sue the seller of the securities. A purchaser has this right of action when
The securities were sold in violation of the registration provisions of the Uniform Securities Act; The offer or sale was made by a person who should have been registered as a broker dealer or agent under the Act, hut was not; The securities sold were misrepresented (e.g., stating they were recommended or approved by the Administrator); the state’s requirements regarding sales literature were violated in connection with the sale; The seller violated any requirements for the offering mandated by the Administrator. (For example, the Administrator required the delivery of a prospectus for offerings registered by qualification.); The seller made an untrue statement or omitted a material fact, as part of the offer or sale.
If any of these violations occur, the purchaser has the right to recover
The full purchase price + Interest (determined by the state)+ Court costs and reasonable attorney fees-Income received from the security
A letter of rescission is used when
a registered person realizes that he has effected an illegal sale. This letter represents an offer to buy back the security, plus interest, minus any income received on the security. If the client does not act within 30 days of receipt of the letter, the client would generally not be permitted to bring action in court
Just as the seller of securities is, at times, liable to the purchaser for certain violations of the USA, a person who dispenses investment advice for a fee and, in doing so, acts in a fraudulent manner, is liable to that advisory client. The advisory client may sue to recover
The cost of the advice+ Any loss due to the advice+ Interest (determined by the state)+ Court costs and reasonable attorney fees- Income received from the security
The liability also extends to supervisors who may be judged as guilty of failure to
supervise employees properly
No person may sue under the civil liabilities section of the uSA more than
three years after the occurrence of the violation or rendering of the investment advice, or after 2 years fro1m discovering the violation whichever occurs first
Cases brought under the Uniform Securities Act within the statute of limitations survive the death of
a plaintiff or defendant
