The Uniform Securities Act and State Administrator

The whole foundation unit on one sheet: what the USA is, who the Administrator is, when a state has jurisdiction, and the powers the exam loves to test.

What the USA Is

• The Uniform Securities Act (USA) of 1956, as amended by the North American Securities Administrators Association (NASAA), is a model state law states adopt (with modifications) to regulate securities transactions, professionals, and offerings.
• A blue-sky law: state legislation designed to protect investors from fraud.
• The exam tests the 1956 Act as amended by NASAA, NOT the 2002 version.
• The antifraud provision is the single most important rule: it bars any device to defraud, any untrue statement or omission of a material fact, and any act operating as fraud or deceit, in connection with the offer, sale, OR purchase of any security.
• The antifraud provision has NO exemptions: even exempt securities and exempt transactions are subject to it.

The State Administrator's Role

• The Administrator is the state official or agency designated to administer and enforce the state's securities laws; the title varies (Commissioner, Director, Secretary of State, or other).
• Each state has its own Administrator; there is no single national Administrator.
• NASAA coordinates among state Administrators but is NOT a regulator: it cannot investigate, issue orders, or bring enforcement actions.
• The Administrator may make, amend, and rescind rules and orders consistent with the Act, and may require written statements under oath.

Jurisdictional Scope

• A state's law applies when either prong is met: an offer to sell is made in the state, OR an offer to buy is made and accepted in the state.
• An offer is made in the state when it originates from the state OR is directed to and received in the state; neither party need be physically present.
• A call from State A to a prospect in State B is made in both states, so both may exercise jurisdiction over the same transaction.
• Investment advisers face a broader standard: any act instrumental in effecting prohibited conduct done in the state triggers jurisdiction.

The One-Liners That Win Points

• Registration becomes "effective," never "approved": telling a customer a security was "approved by the state" is an unlawful misrepresentation.
• The Administrator may investigate publicly or privately, within or outside the state, with no prior court approval.
• The Administrator can issue a subpoena but cannot enforce it: enforcement requires applying to a court.
• A cease and desist order can be issued with or without a prior hearing, no court approval needed.
• Compelled testimony carries use immunity: the testimony cannot be used against the witness, but the witness is never immune from perjury or contempt.
• The Administrator needs no bond to seek an injunction.
• Media exclusions protect only the media, not follow-up targeted contact into the state.

Numbers to Lock In

Memory Aid: Who Can Do What

• Administrator alone: Investigate, subpoena, cease and desist
• Administrator + Court: Enforce subpoenas, injunctions
• Court alone: Arrest, criminal penalties, imprisonment

Top Gotchas

• No exemption shields fraud. A government bond may be exempt from registration, but selling it through fraud still violates the antifraud provision.
• NASAA is not a regulator. It coordinates and writes model rules; only the individual state Administrator enforces.
• Multiple states can have jurisdiction over one transaction. The originating state and the receiving state can both regulate the same offer.
• The 2/3 rule applies only to publications published IN the state. More than 2/3 of circulation outside the state means the ad does not trigger jurisdiction there; 60% outside (less than 2/3) means the exclusion does NOT apply.
• A broadcast originates where the microphone or camera is, not at a relay station.
• The Administrator cannot impose criminal penalties or arrest anyone. Criminal prosecution goes to the attorney general or district attorney; courts impose fines and imprisonment.
• Confidentiality binds the Administrator's own staff too: officers and employees cannot use non-public information for personal benefit.

One-Breath Recap

The Uniform Securities Act (USA) of 1956, as amended by NASAA, is the model blue-sky law states adopt to police securities transactions, professionals, and offerings, and its antifraud provision has no exemptions. Each state's Administrator (title varies) enforces it, while NASAA only coordinates. Jurisdiction attaches when an offer is made or accepted in the state, so multiple states can reach one transaction, and advisers face an even broader standard. The Administrator can investigate, subpoena, and issue cease and desist orders alone, needs a court to enforce subpoenas or grant injunctions, and can never arrest or impose criminal penalties. Registration is "effective," never "approved."

Need more than the recap? This is a condensed summary. If it is not enough, read the full The Uniform Securities Act and State Administrator unit for the complete lesson.