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One of the keys to passing the Series 63 exam is to make sure that you have a complete understanding of how The Uniform Securities Act will be tested on the Series 63 Exam. This article which was produced from material contained in our Series 63 textbook and will help you master the material so that you pass the Series 63 exam.
The state securities administrator has the authority to enforce all of the provisions of the Uniform Securities Act (USA) within their state. The state securities administrator may deny, revoke, or suspend the registration of a security, an agent, or a firm. The administrator may also revoke an exemption from registration, subpoena and investigate any registrant, and amend rules as required. The North American Securities Administrators Association or NASAA is the oldest investor protection organization in the country and represents the interest of all of the state securities administrators. NASAA also writes policies and administers the Series 63, 65, and 66 exams.
A state securities administrator may take action to bar, suspend, censure, or restrict the activities of a registrant if the administrator finds it in the public interest, and the applicant or registrant does one or more of the following:
The administrator deeming it is in the public interest is not enough to take action. The applicant must have been involved in one or more of the activities listed above. If the administrator is going to take action against the applicant, it must notify them promptly in writing of their intention and must provide a hearing for the applicant within 15 days of receiving the request for a hearing. An administrator may deny an applicant’s registration based on lack of knowledge, training, or experience but a lack of experience, may not be the sole basis for the denial of a registration.
The administrator may cancel the registration of a broker dealer, investment adviser, or an agent if the registrant or applicant no longer exists, has ceased doing business, or cannot be located. An individual’s registration may be cancelled if they have been deemed incompetent.
A broker dealer, investment adviser, or an agent may request that their registration with the state be withdrawn. The withdrawal will become effective 30 days after the administrator receives the request if no revocation or suspension proceedings are in process. The administrator has up to one year after the withdrawal of an applicant’s registration to take action against the applicant to suspend or revoke their registration.
The administrator may deny, revoke, or suspend the registration of a security if it deems it is in the public interest and:
The administrator may also revoke a security’s exemption from registration if it is in the public interest and the exemption was based on a false, misleading, fraudulent, or unethical practice or statement. An administrator may, without prior notice, revoke the exempt status of a securities transaction.
An administrator may change or amend rules as he or she deems necessary. All rules enacted by the administrator will have the same force and effect as rules enacted under the USA. An administrator’s order may be appealed to the court system within 60 days.
A state securities administrator may investigate a broker dealer, an investment adviser, or an agent in any state if they feel that a violation has taken or may take place. The administrator may also subpoena people, books, and records in any state and may administer oaths to compel people to testify. Anyone who displays contempt for the administrator’s order is guilty of contumacy and may be found in contempt of court if the administrator asks the court to enforce its orders.
A state securities administrator may issue a cease and desist order without a prior hearing or notice. The administrator may appoint a receiver to oversee the assets of violators and may require them to make restitution. Anyone who is found to have criminally violated the laws of the USA is subject to a $5,000 fine and/or three years in prison. People who criminally violate the Investment Advisers Act of 1940 are subject to a $10,000 fine and/or five years in prison. The statute of limitations for an administrator taking action is five years.
An investor who sues for a violation of the Uniform Securities Act is entitled to receive:
Civil actions may be taken against:
If an investment adviser violates the provisions of the USA, clients may sue to recover: