Unit 12 Flashcards
Sale
Any security given or delivered with, or as a bonus on account of, any purchase of securities or any other thing
Offer to sell
Attempt to sell (Solicitation)
Assessable stock
A type of stock issue sold to investors at a discount in exchange for the right to come back for more money at a later date
Exclusions from sale
- Bona fide pledge/loan
- Gift of nonassessable stock
- Stock dividend
- Class vote by stockholders, act incident to a judicially approved reorganization with which a security is issued in exchange for one or more outstanding securities, claims, or property interest, or partly in such exchange and partly for cash
Jurisdiction
The legal authority to regulate securities activities that take place in the state
3 circumstances where Administrator doesn’t have jursidiction
- Television or radio broadcast that originated outside of the state
- Bona fide newspaper or periodical published outside of the state
- Newspaper or periodical published inside the state but with more than two-thirds (66%) of its circulation outside the state in the last year
What is a bona fide newspaper?
Example: New York Times
4 broad powers of Administrator
- make, amend, or rescind rules and orders 2. conduct investigations/issue subpoenas
- Issue cease and desist orders
- Deny, suspend, cancel, revoke registrations/ licenses.
What rule applies to
Everyone
What order applies to
Specific instances
Contumacy
Stubborn refusal to obey or comply with authority, especially a court order or summons
Who cease and desist orders are directed to
Individuals
Definition of enjoined
Legal term that is used to refer to a person who is the subject of an injunction.
Two actions Administrator can take if a person is violating acts or rules
- Issue cease and desist
- Issue injunction to enforce order being violated
Definition of acting summarily
Order, without having to go through the hearing process, a postponement or suspension of a registration
When must an applicant submit a written request for a hearing after being ordered
Within 15 days
Definition of final order
When the Administrator (or a court) renders a judgment in an action
If a person commits a misdemeanor, then moves to a state where that act is a felony, and applies to be a representative, what record does the Administrator look at?
The originally recorded misdemeanor
3 things that must happen before registration is denied, suspended, or revoked
- Appropriate prior notice to the applicant or registrant and their employer
- Opportunity for hearing
- Written findings of fact and conclusions of law
When an Administrator may deny, revoke, suspend a security registrant
- Files a misleading or incomplete registration statement;
- Is engaged in an offering that is fraudulent or made on unfair, unjust, or inequitable terms
- Charges offering fees that are excessive or unreasonable
- Has a control person convicted of a securities-related crime
- Is subject to a court injunction;
- Is engaged in a method of business that is illegal
- Is subject to an administrative stop order of any other state
Vacated
Term used to describe lifting of stop order
Who stop orders are directed to
Issuers
When withdrawal is effective after person requests on their own initiative
30 days after Administrator receives it
How long administrator retains jurisdiction after effective date of withdrawal takes place
One year
What would the Administrator do if mailings to a registrant were returned with no forwarding address
Cancel the registration
Why cancellation occurs
The result of death, dissolution, or mental incompetency
When suspension of broker-dealer is over what happens to agent’s licenses?
They are reactivated
If client’s case against broker-dealer is proven, what do they recover? (3)
- The original purchase price of the securities
- Interest at a rate determined by the Administrator
- All reasonable attorney’s fees and court costs
Right of rescission
When broker-dealer buys back securities from a purchaser because they realize they were sold in violation of USA
Letter of rescission
Issued by seller to buyer, buyer has 30 days to respond
In order for a surety bond to meet the requirements of the USA, what must it provide?
Proof that they are entitled to collect against the bond
When a client must commence a lawsuit to be eligible for recovery from damages
Three years of occurrence or two years of discovery, whichever occurs first
If an agent chooses to appeal an Administrator’s order, when must the agent file for review of the order with the appropriate court?
Within 60 days after entry of order
As a result of a hearing held by the Administrator, the registration of a broker-dealer is revoked. Waht happens to agent’s licenses?
They are revoked
What administrator issues final order, what can agents do? (2)
- Obtain a review of the order in an appropriate court of law
- Request that additional evidence be presented to the court
When administrator can revoke a firm’s registration (2)
- Firm is insolvent
- Agent within has been convicted of a felony
Violation of the Uniform Securities Act may result in criminal penalties of up to
$5,000 and/or three years in prison
Does the court or Administrator issue injunctions?
Court
If an investment adviser representative commits a criminal violation of the Uniform Securities Act, how many years are they subject to legal action for?
5 years after the violation
Cases in which registration will be revoked
Adviser has been convicted of a non-securities-related felony
Cases in which registration will be canceled
Adviser is found to be mentally incompetent, cannot be located, or is no longer in business.
As long as a broker-dealer is registered in a state, does the administrator of that state have the jurisdiction to perform an onsite, unannounced examination?
Yes
Causes listed in the Uniform Securities Act that could lead to the revocation of the registration of a broker-dealer (2)
- A principal officer was convicted of a securities-related crime
- The firm was unable to meet its obligations as they came due
