The State Administrator and the Uniform Securities Act

Question 1

NASAA

Answer 1

A group of all state admins across the nation that get together to create guidelines and rules states can elect to use if they want.

- Issues Policies statements and create model rules
- Unethical business practices
- Dishonest sales practices
- Rules for investment advisors who have custody

Question 2

Uniform Securities act

Answer 2

A model legislation template that states can use to create their laws and regulations

Question 3

State Securities Administrator:

Answer 3

The top securities regulator in each state. They adopt and adjust the uniform securities act for their state.

- Enforce the provision of USA
- May change and amend
- Sets testing and fee requirements
- Issues orders to someone 
- Issues interpretive opinions
- May deny, revoke or cancel a registration or an exemption of an exemption

Question 4

Action against a registrant can be taken by state Admin IF:

Answer 4

1) Its in the public best interest AND
2) They do any of the following:
a. Violates state or federal securities laws
b. Files a false application for registration
c. Fails to supervise employees
d. Engaged in dishonest or unethical practices
e. Subject to a Court Order

Question 5

Cancellation of Registration

Answer 5

(done by State Admin)
Is not a punishment for bad behavior
	1) Fails to pay filing fees
	2) Becomes Insolvent
	3) Cannot Be Located
	4) Is deemed mentally incompetent

Question 6

Action can be taken against an issuer of securities IF

Answer 6

1) Any officer or director has been convicted of a securities crime
2) The registration statement is false, misleading, or incomplete
3) The security is subject to a court injunction
4) Promoters fees or offering expenses are excessive or unreasonable
5) The offering is fraudulent

Question 7

Exemptions from registration:

Answer 7

the State security admin may revoke any exemption from registration if in the Admins view the exemption doesn’t apply. The responsibility of convincing the validity of the exemption is on the organization’s shoulders, not the admins.

Question 8

Rule Changes Appeals Process

Answer 8

Any hurt party to changes may appeal within 60 days of changes

Appeal doesn’t act as a stay. Only a court can enact a stay of the rules

Question 9

Cease and Desist Order

Answer 9

Taken against an action against an agent or a firm. Basically telling then to stop doing that action

Question 10

STOP Order

Answer 10

Goes against a registration

If the defect that caused the stop order is cured the admin may lift the order and allow the registration to go through

Question 11

Summary Order

Answer 11

An order that is issued without prior notice to the receiver and without a prior hearing. It just shows up in the mail.

Question 12

Jurisdiction of State Securities Administrator

Answer 12

If an advisor is registered and in one state and the client is in a different state then and the advisor tells the client they should purchase a security. That security purchase is under the jurisdiction of the advisors state because that is where the sale originated. The clients state admin also has jurisdiction because that is where they sale was accepted.

If the client is in new York
The advisor lives in Colorado
And the client goes on vacation to Florida. And that’s where the advisor gives him a call about buying a security, but then he goes back to New York to think about it then when back home in new york gives the advisor a call to give him the thumbs up on buying. Then all three state admins would have jurisdiction here.

Its all about 3 things:

1) Where it was originated (what state the registered Advisor is)
2) Where is was directed (Where the customer sits when they pick up the phone)
3) Where it was accepted (what state they were in when the customer decided to do it)

Question 13

Interpretative Opinions

Answer 13

Broker-Dealer or IA seeking guidance from the State Admin to see if an action is with the rules.

They pay a fee for this guidance.

Then the admin can send a no-action letter that would say if they do that action the admin won’t take action as long as that action is done exactly how previously described

Question 14

State admin must maintain copies of:

Answer 14

1) applications for registrations
2) Orders
3) Actions
4) Interpretative opinions
5) Claims for exemption

Will provide certified copies of any of these records for a fee

Question 15

State Admin Investigations

Answer 15

May investigate and subpoena people’s books and records in any state if action impacted administrators state.

- People may not plead the 5th
- Admin may not arrest people
- Only a court can enforce orders

Question 16

Criminal Penalties

Answer 16

• Violation of Uniform Securities Act = $5k fine and up to 3 years in prison
• Violation of Investment advisors act of 1940 = 1940 $10k fine and 5 years in prison

Question 17

Radio, TV, and Newspaper

Answer 17

An advertisement nor a solicitation will not be deemed to have been made in a state if:

1) The television broadcast originated outside the admin’s state
2) The radio broadcast originated outside the administrator’s state
3) The newspaper or periodical was published outside the administrator’s state
4) The newspaper or periodical was published inside the state but two-thirds of its circulation is outside of the state of publication

Question 18

Actions at the state level clients can take

Answer 18

• Clients can take action 3 years from the event or 2 years from discovery whichever occurs first
• No punitive damages => you can only receive the recovery of your losses and court costs no further money

Question 19

Right of Rescission

Answer 19

Broker dealer realizes it sold a security to a customer that was not appropriate:
1) Offer must be in writing
2) Must agree to repurchase at the original price
3) Must include interest
Customer has 30 days to accept
If taken the client cannot pursue legal action on broker-dealer any further.