Chapter 8 Part 4 Flashcards
All commissioners serve a
“five-year term and, during that time, mnst engage in the business of the
SEC full-time. These members are prohibited from engaging in securities transactions during their term. While carrying out their duties, the commissioners may be reimbursed for certain expenses that are incurred”
If the SEC determines that a violation of the Investment Advisers Act or any federal act involving securities has been or is about to be committed, it may require a
statement in writing as to the relevant facts and circumstances and may conduct whatever investigation it deems appropriate
The SEC may administer
oaths, subpoena witnesses, gather evidence, and require the production of records. If a person refuses to comply with a subpoena, the SEC may obtain a court order compelling compliance
The SEC may investigate violations of rules of
the national securities exchanges and self-regulatory organizations
The purpose of SROs, such as the Financial Industry Regulatory Authority (FINrA) and the Municipal Securities Rulemaking Board (MSHB), is to
promote fair and equitable business practices in the securities industry
The SEC has the authority to suspend trading in a specified security for up to
10 days.
the SEC also has the power to suspend all trading on an exchange for up to
90 days with prior notification of the president of the United States
If a person has violated, or is about to engage in an action that violates a federal securities act, the SEC may
seek an injunction in a federal court. The SEC may also transmit evidence of violations to the United States Attorney General, who may institute criminal proceedings
Any person subject to an SEC order may appeal the order to one of the federal appeals courts by
filing a written petition within 60 days of the date the order is entered. Unless specifically directed by the court, an appeal does not operate as a stay of the SEC’s order
The SEC is empowered to make, amend, or abolish
rules or regulations it deems necessaty to enforce compliance with the Investment Advisers Act. It also may issue interpretations of its rules to provide guidance to investment advisers (e.g., SEC Release IA-1092)
Keep in mind, the SEC is focused on the public’s best interest and protection of investors. Therefore, information contained in a registration application or report filed with the SEC is made available to
the public unless the SEC determines that public disclosure is neither necessaty nor appropriate
The SEC will not make public the fact that an examination or investigation is being conducted. Also, the results of these examinations will be
confidential, except in the case of public hearings or a request for disclosure from Congress
The Investment Advisers Act does not authorize the SEC to require an investment adviser to disclose the
identity, invest1nents, or affairs of any client unless such disclosure is required to enforce compliance with the Investment Advisers Act
Similar to state law, civil and criminal penalties are imposed when a violation of
securities acts occurs
A person who makes an untrue statement or material omission in a registration statement is subject to
SEC penalties and may be sued by any purchaser of the security who was not aware of the untrue statement or omission
Those who may be sued include
Every person who signed the registration statement; Every director or partner of the issuer; Every accountant, engineer, appraiser, or similar professional person who prepared or certified any part of the registration statement; Every underwriter of the security
The amount of damages may include
The full purchase price + Interest (determined by the state) - lncome received from the security
Action to recover must be brought within
one year of discovery and within three years of occurrence
Violations of federal securities acts, including the Investment Advisers Act, fall under the jurisdiction of
district courts of the United States. Criminal proceedings must be brought in the district where the violation occurred
Any person who willfully violates a federal securities act or SEC rule or regulation is subject to a fine not exceeding
$10,000, imprisonment for up to five years, or both
