An Administrator investigating suspected fraud in sales of limited partnership interests issues a subpoena to an individual who arranged the sales. When questioned, the individual refuses to answer, claiming that his answers may incriminate him. The Administrator applies to the appropriate court to compel his testimony.
Under the Uniform Securities Act, which statement is correct? Answer: He must answer if compelled, but cannot be prosecuted over matters he testifies to, except perjury or contempt.
Uniform Securities Act § 407 provides that no person is excused from testifying or producing records before the Administrator on the ground that the testimony may tend to incriminate him. An individual who is compelled to testify after claiming the privilege may not be prosecuted or penalized for any transaction, matter or thing about which he testifies, except for perjury or contempt committed in testifying. The statement that the privilege ends the inquiry ignores § 407's rule that the privilege is no excuse and that a court can compel the testimony. The statement that he may then be prosecuted for the disclosed transactions ignores the immunity that compelled testimony brings. The statement that the immunity covers perjury ignores the express exception for perjury and contempt.
For several months, mail sent by an Administrator to a state-registered investment adviser has been returned as undeliverable. Repeated efforts by the Administrator's staff to find the adviser or any of its officers have failed, and the adviser's telephone number is disconnected. The adviser has not filed an application to withdraw, and the Administrator has no evidence that the adviser violated the Act.
Under the Uniform Securities Act, which action may the Administrator take? Answer: Cancel the registration by order, because the registrant cannot be located after a reasonable search.
Uniform Securities Act § 204(d) lets the Administrator cancel a registration by order when the registrant no longer exists, has ceased to do business, is adjudicated mentally incompetent, or cannot be located after a reasonable search. Cancellation does not require the § 204(a) two-part finding of public interest plus a statutory ground. The adviser here cannot be found after repeated efforts, so cancellation is available. The revocation statement fails because revocation under § 204(a) needs a statutory ground, and the facts give none. The statement that only expiry on December 31 or withdrawal can end the registration ignores the cancellation power. The deemed-withdrawal statement is wrong because a withdrawal under § 204(e) starts with the registrant's own application to withdraw, which this adviser never filed.
- Under the Uniform Securities Act, which of the following statements regarding the Administrator's investigatory and subpoena power is true?
Answer: The Administrator may investigate inside or outside the state and may subpoena witnesses and records, with a court enforcing noncompliance.
Under Uniform Securities Act §407, the Administrator may conduct public or private investigations inside or outside the state, administer oaths, subpoena witnesses, compel attendance, take evidence, and require production of records. A refusal to comply is enforced through a court, not by the Administrator's own contempt power. A subpoena is not limited to formal proceedings or to registered persons; the Administrator may investigate potential violations by unregistered persons as well. The imprisonment statement is wrong because the Administrator has no power to imprison for contempt without court action.
In his application for registration as an investment adviser representative, an applicant disclosed a final order entered against him eight years earlier by another state's securities regulator. The Administrator took no action, and the registration became effective. Five months after the effective date, the Administrator institutes a proceeding to revoke the registration based solely on that order. The registration is an initial registration, not a renewal.
Under the Uniform Securities Act, which statement is correct? Answer: The proceeding is untimely because it had to be started within 90 days after the registration took effect.
Uniform Securities Act § 204(a), closing paragraph: the Administrator may not institute a proceeding based solely on a final order that was disclosed in the application before registration became effective unless the proceeding is instituted within 90 days after registration became effective; the limit does not apply to renewals. This was an initial registration and the proceeding came five months after the effective date, so it is untimely. The ten-year lookback statement is wrong because falling within the lookback for the other-state ground does not lift the 90-day limit on a disclosed order. The one-year statement borrows the § 204(e) period that applies after a withdrawal, not after registration. The statement that a disclosed order can never support revocation overstates the rule: it can, if the proceeding is begun within 90 days.
An Administrator receives complaints that an unregistered person is holding itself out as an investment adviser and making false performance claims to elderly residents. Without holding a hearing or obtaining a court order, the Administrator issues a cease-and-desist order directing the person to stop the activity. The person objects, arguing that the order is invalid because the Administrator did not first prove the claims in a hearing and because the person is not registered.
Under the Uniform Securities Act, which statement best describes the Administrator's authority? Answer: The order is valid because the Administrator may issue a cease-and-desist order with or without a prior hearing, even against an unregistered person.
Under Uniform Securities Act § 408, the Administrator may issue a cease-and-desist order with or without a prior hearing. The enforcement power is not limited to registered persons, so an unregistered person who appears to be violating the Act may be ordered to stop. The Administrator does not need a court injunction or a prior adjudication to issue the order. The option requiring a prior hearing, the option limiting the order to registered persons, and the option imposing a 15-day injunction requirement each add a condition the Act does not contain.
After notice and a hearing, an Administrator issues a final order revoking the registration of an investment adviser representative of a state-registered investment adviser. Forty-five days later, the representative files a petition for judicial review of the order in the appropriate court. The court has not acted on the petition. The representative keeps meeting with advisory clients, arguing that the petition suspends the revocation until the court rules.
Under the Uniform Securities Act, which of the following is correct? Answer: The petition is timely, but filing it does not stay the revocation unless the court orders a stay.
Uniform Securities Act § 411 lets a person aggrieved by a final order of the Administrator petition the appropriate court for review within 60 days after the order is entered, and the filing does not operate as a stay of the order unless the court orders otherwise. The petition was filed 45 days after the order, inside the 60-day period, but no court has stayed the revocation, so the representative may not keep acting as an IAR. The 30-day statement uses the wrong period. The statement that filing stays the revocation ignores that only a court order can stay it. The statement that an order entered after a hearing is not reviewable is wrong because § 411 review is available for final orders, including those entered after a hearing.
- Under the Uniform Securities Act, which of the following statements regarding an applicant's failure to pay the required filing fee is true?
Answer: The Administrator may enter only a denial order on this ground, and must vacate the order once the applicant pays the fee.
Uniform Securities Act § 204. Failure to pay the proper filing fee is a statutory ground on which the Administrator may enter only a denial order (with the public-interest finding every § 204 order requires), and the Administrator must vacate that order when the deficiency is corrected by payment. The statement allowing a revocation that stands after payment is wrong: nonpayment supports only a denial, never a suspension or revocation, and the order ends on payment. The statement requiring that the nonpayment be willful is wrong: willfulness is an element of the willful-violation ground, not of the fee ground. The statement that the denial lasts one year despite payment is wrong: the Act requires the order to be vacated once the fee is paid; one year is the period after a withdrawal within which the Administrator may still start a revocation or suspension proceeding.
- Under the Uniform Securities Act, which of the following statements regarding the Administrator's authority to require the filing of sales literature or advertising is true?
Answer: The Administrator may require sales literature to be filed for a registered nonexempt offering, but not for an exempt security, exempt transaction, or federal covered security.
Under Uniform Securities Act §403, the Administrator may require the filing of prospectuses, advertisements, and sales literature used in offers of securities that are registered or required to be registered under the Act, but not for exempt securities, exempt transactions, or federal covered securities. The statement covering all offers in the state ignores those exclusions; the stop-order statement is wrong because filing authority is not conditioned on prior misconduct; the exempt-transaction statement reverses the rule.
- Under the Uniform Securities Act, which of the following statements regarding an order summarily postponing or suspending a registration pending final determination of a proceeding is true?
Answer: The order may be entered without a prior hearing, and on the registrant's written request the matter must be set for hearing within 15 days.
Uniform Securities Act § 204. The Administrator may summarily postpone or suspend a registration pending final determination of a proceeding under § 204, without a prior hearing; the registrant is notified of the order and its reasons, and if the registrant makes a written request the matter must be set for hearing within 15 days after the request is received. The statement requiring notice, an opportunity for a hearing and written findings before entry is wrong: that is the procedure for other orders under § 204, and the Act expressly excepts a summary order. The statement that the order lapses after 15 days unless a court injunction extends it is wrong: 15 days is the time for setting a requested hearing, and the summary order stays in effect pending the final determination without any court action. The statement that the registrant's only route to a hearing is a court petition within 60 days is wrong: 60 days is the period for seeking judicial review of an order under § 411, and the Act gives the registrant an administrative hearing on written request.
- Under the Uniform Securities Act, which of the following statements regarding the Administrator's power to require an escrow of promoters' securities and an impoundment of offering proceeds is true?
Answer: The Administrator may require them as a condition of a registration by coordination or of a registration by qualification.
Uniform Securities Act § 305. For a registration by coordination or by qualification, the Administrator may require, as a condition of registration, an escrow of securities issued to promoters within the past three years and an impoundment of the offering proceeds. The statement limiting the power to qualification is wrong: coordination is also covered, and SEC review of the federal registration statement does not remove the state condition. The statement extending the power to registration by filing is wrong: § 302 filing, for established reporting issuers, is not one of the two methods the escrow and impound power covers. The statement tying the power to a stop order is wrong: escrow and impoundment are conditions the Administrator may set on the registration itself, not remedies that depend on a prior stop order.
- Under the Uniform Securities Act, which of the following statements regarding the Administrator's authority to require bonds from registrants is true?
Answer: The Administrator may require a bond of registrants with custody or discretion, but not where net capital or minimum financial requirements exceed the bond amount.
Under the Uniform Securities Act registration provisions, the Administrator may require a bond of a broker-dealer, agent, or investment adviser that has custody of client funds or securities or discretionary authority. A bond may not be required where the net capital or minimum financial requirement imposed exceeds the bond amount. The broad condition-of-registration statement is wrong because bonding is tied to custody or discretion; the broker-dealer/agent-only statement is wrong because advisers may be bonded; the civil-liability statement is wrong because bonding is a preventive requirement, not a penalty.
- Under the Uniform Securities Act, which of the following offers of securities is considered made in the Administrator's state?
Answer: An offer made by telephone from outside the state to a resident of the Administrator's state who receives the call in the state.
Under Uniform Securities Act §414, an offer is made in the state when it originates from the state or is directed to and received in the state. A telephone offer directed to and received by a resident in the state meets that test. An out-of-state radio broadcast is not made in the state even when received in the state, a newspaper published in the state with more than two-thirds of its circulation outside the state during the preceding 12 months is also outside the statute, and a newspaper published outside the state falls within the publication safe harbor.
An Administrator begins investigating a state-registered investment adviser after a client complaint. The adviser files a notice of withdrawal. The Administrator does not begin a formal proceeding within 30 days, so the withdrawal becomes effective. Ten months later, the Administrator issues an order to show cause seeking to revoke the adviser's registration because the adviser willfully violated the Act before the withdrawal. The adviser argues that the proceeding is untimely.
Under the Uniform Securities Act, which statement is correct? Answer: The proceeding is timely because the Administrator has one year after the withdrawal takes effect to start a revocation or suspension proceeding.
Under Uniform Securities Act § 204(e), a withdrawal takes effect 30 days after filing unless a revocation or suspension proceeding is pending or begun within those 30 days; an investigation alone does not block it. The Act, however, preserves the Administrator's power to begin a revocation or suspension proceeding under § 204(a)(2)(B), the willful-violation ground, within one year after the withdrawal takes effect. The proceeding here rests on a willful violation and was begun ten months after the effective date, so it is timely. The 30-day argument confuses the deadline for blocking the withdrawal with the one-year window for later proceedings, the statement that a pending investigation keeps the withdrawal from taking effect is wrong because only a pending proceeding does, and the statement that withdrawal ends all jurisdiction ignores the one-year provision.
An Administrator is investigating a state-registered investment adviser for possible fraudulent misrepresentations to clients. The adviser's books and records are held by a third-party service provider in another state. When the Administrator subpoenas the records, the adviser refuses to produce them, arguing that the Administrator has no authority outside the state.
Under the Uniform Securities Act, which of the following is correct? Answer: The Administrator may investigate and subpoena records outside the state, and may seek a court order to enforce the subpoena if the adviser refuses.
Uniform Securities Act § 407 permits the Administrator to conduct investigations within or outside the state and to subpoena relevant records; if the person refuses, the Administrator may apply to a court to enforce the subpoena. The statement that the Administrator must work through the SEC or another state regulator is wrong because § 407 gives the Administrator independent authority outside the state. The statement conditioning production on a cease-and-desist hearing is wrong because the subpoena is the investigative tool and the court enforces it. The statement limiting relief to a criminal prosecution is wrong because the Act's civil investigative remedies do not depend on criminal charges.
An applicant for registration as an investment adviser representative has passed the required examinations, completed a graduate finance program, and worked under supervision for eight months. The applicant has no disciplinary history. The Administrator proposes to deny the application solely because the applicant lacks two years of experience, which the Administrator believes is needed to protect the public interest.
Under the Uniform Securities Act, may the Administrator deny the application on this basis? Answer: No, because lack of experience alone cannot support a denial if the applicant is otherwise qualified by training or knowledge.
Uniform Securities Act § 204 allows denial only when the Administrator finds both public interest and a statutory ground, such as lack of qualification; however, lack of experience alone cannot support a denial if the applicant is qualified by training or knowledge. The statements saying the Administrator may set experience standards ignore that statutory limit. The statement requiring a prior hearing is wrong because the Act requires notice and an opportunity for a hearing, not a completed hearing before the denial.
