Administrator Powers

Now that you understand jurisdiction, let's look at what the Administrator can actually do once a potential violation falls within the state's reach. The Administrator has broad investigative and administrative powers, but there are clear limits.

Investigations (Section 407(a))

The Administrator may conduct public or private investigations to determine whether any person has violated or is about to violate the Act:

• Investigations can occur within or outside the state
• No prior court approval is needed to launch an investigation
• The Administrator may investigate at their discretion
• The Administrator may require any person to file a written statement under oath concerning the matter under investigation
• The Administrator may publish information concerning any violation of the Act

Subpoena Power (Section 407(b))

For any investigation or proceeding, the Administrator or a designated officer may:

• Administer oaths and affirmations
• Subpoena witnesses and compel their attendance
• Take evidence
• Require production of books, papers, correspondence, memoranda, agreements, or other documents or records deemed relevant or material

Think of it this way: The Administrator has a wide net for gathering evidence. If a document or witness might be relevant to a securities violation, the Administrator can demand it.

Enforcing Subpoenas (Section 407(c))

There is an important limitation: the Administrator cannot directly enforce subpoena compliance.

• If a person refuses to obey a subpoena (called contumacy), the Administrator must apply to a court of competent jurisdiction for an enforcement order
• Only the court can compel compliance
• Failure to obey the court's order may be punished as contempt of court

Exam Tip: Gotchas

The Administrator can issue a subpoena but cannot enforce it. Enforcement requires going to court. This is a commonly tested distinction.

Cross-Border Subpoenas (Section 407(e))

The Administrator can cooperate across state lines:

• The Administrator may issue and enforce subpoenas at the request of another state's securities administrator
• The condition: the alleged violation must be one that would be a violation of the requesting state's Act if the activities had occurred in the Administrator's own state

This allows states to assist each other in investigations without gaps in enforcement.

Self-Incrimination and Immunity (Section 407(d))

This is a frequently tested concept:

• No person may be excused from testifying or producing documents on the ground that testimony may tend to incriminate them
• However, a person who is compelled to testify after claiming the privilege against self-incrimination receives use immunity
• Use immunity means: the compelled testimony cannot be used as evidence to prosecute the witness

Think of it this way: Use immunity is a trade-off. The state says, "You have to talk, but we promise not to use your own words against you." The state can still prosecute you using other evidence it finds independently. And if you lie while testifying, perjury charges are fair game.

Exam Tip: Gotchas

The Administrator can compel testimony even when a person claims self-incrimination. The trade-off is use immunity: the compelled testimony cannot be used against the witness. But the witness is not immune from prosecution altogether, and they are never immune from perjury or contempt charges.

Cease and Desist Orders (Section 408(a))

• The Administrator may issue a cease and desist order directing a person to stop engaging in prohibited activities
• A cease and desist order can be issued with or without a prior hearing
• This is an immediate enforcement tool to stop ongoing violations
• No court approval is needed to issue the order

Exam Tip: Gotchas

A cease and desist order does not require a prior hearing. The Administrator can issue one immediately to stop an ongoing violation.

Injunctions (Section 408(b))

When the Administrator needs court-backed enforcement, they can seek injunctive relief:

• The Administrator may bring an action in court to enjoin acts or practices that violate the Act
• The court may grant:
  • Permanent or temporary injunctions
  • Restraining orders
  • Writs of mandamus
• The court may also:
  • Appoint a receiver or conservator for the defendant's assets
  • Order rescission, restitution, or disgorgement
• The Administrator is not required to post a bond when seeking injunctive relief

Exam Tip: Gotchas

The Administrator does not need to post a bond to seek an injunction. This is unusual because private parties typically must post bond when seeking injunctive relief.

What the Administrator Cannot Do

Think of it this way: The Administrator is an investigator and regulator, not a judge or police officer. They can dig into potential violations and issue administrative orders, but when it comes to criminal punishment or forcing compliance, a court must step in.

Memory Aid:

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

Exam Tip: Gotchas

The Administrator cannot impose criminal penalties. Criminal prosecution must be referred to the attorney general or district attorney. The Administrator can issue cease and desist orders (no court needed) but needs a court to enforce a subpoena or grant an injunction.