Administrator Powers

These powers form a spectrum: some the Administrator wields alone, some require a court's help, and criminal punishment is reserved for courts entirely.

What Investigative Powers Does the Administrator Have?

The Administrator may conduct public or private investigations to determine whether any person has violated or is about to violate the Act, to aid in enforcing the Act, or to aid in prescribing rules and forms:

• 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 or permit any person to file a written statement, under oath or otherwise as the Administrator determines, as to all the facts and circumstances concerning the matter under investigation. The oath is at the Administrator's election, not automatic
• The Administrator may publish information concerning any violation of the Act

What Subpoena Power Does the Administrator Have?

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.

Who Enforces a Subpoena the Administrator Issues?

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.

Can an Administrator Help Another State's Investigation?

The Administrator can cooperate across state lines:

• The Administrator may issue subpoenas, and apply to a court to enforce them, at the request of another state's securities agency or administrator (the same court-application route as any other subpoena: the Administrator never enforces one directly)
• The condition is a dual-illegality test judged under the assisting Administrator's own law: the activities alleged must be ones that would violate this state's Act if they had occurred in this state. It is not measured against the requesting state's Act

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

What Happens When a Witness Claims Self-Incrimination?

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 claims the privilege against self-incrimination and is then compelled to testify receives transactional immunity
• Transactional immunity means: the witness may not be prosecuted, or subjected to any penalty or forfeiture, for the transaction, matter, or thing they were compelled to testify about, even if the state later builds a case on wholly independent evidence
• The immunity attaches only if the privilege is claimed first

Think of it this way: The state says, "You have to talk, and in exchange we give up prosecuting you over what you talk about." That is a real bargain, not a technicality, which is why the immunity only attaches if you claim the privilege first. Lie while testifying and perjury charges are still fair game.

Exam Tip: Gotchas

• The Administrator can compel testimony even when a person claims self-incrimination. The trade-off is transactional immunity, and it is broad: NASAA's Official Code Comment calls it "the broader variety which forecloses subsequent prosecution and not merely the use of the compelled testimony."
• The trap is "use immunity." If an answer says the state may still prosecute the underlying fraud using evidence it obtained independently, that describes use immunity, which is what the Uniform Securities Act of 2002 and the federal immunity statutes grant. The 1956 Act as amended, the one this exam tests, grants the broader transactional kind.
• The witness must claim the privilege first, is never immune from perjury or contempt committed in testifying, and is not immune from federal prosecution.

When Can the Administrator Issue a Cease and Desist Order?

Whenever it appears that a person has engaged or is about to engage in a violation, the Administrator may in their discretion pursue either or both of two remedies: a cease and desist order, and a court injunction (below). Choosing one does not rule out the other.

• 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. The trigger reaches anticipated violations too: the Administrator does not have to wait for a completed violation before acting.

When Does the Administrator Seek an Injunction?

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
• Upon a proper showing, the court shall 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 Can't the Administrator 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 or prosecute. The Administrator may refer evidence to the attorney general or district attorney, who may bring criminal proceedings with or without that referral. Referral is permissive, and it is not a precondition to prosecution. The Administrator can issue cease and desist orders (no court needed) but needs a court to enforce a subpoena or grant an injunction.

What Are the Criminal Penalties for Violating the Act?

Criminal punishment is a court's job, not the Administrator's, but the exam still tests the exact numbers a court can impose:

• Any person who willfully violates any provision of the Act (other than the misleading-filing rule below, which has its own knowledge requirement), or any rule or order under the Act, may upon conviction be:
  • Fined not more than $5,000, OR
  • Imprisoned not more than 3 years, OR
  • Both
• A person cannot be imprisoned for violating a rule or order if they prove they had no knowledge of it
• Misleading-filing violations are the one exception: willfully filing a false or misleading statement with the Administrator only carries criminal liability if the person knew the statement was false or misleading in a material respect
• Criminal proceedings must generally be brought within 5 years of the alleged violation (an optional provision; it varies by state)
• Nothing in the Act limits the state's own power to punish the same conduct as a crime under another statute or at common law; securities fraud can be prosecuted under the USA and general criminal-fraud law at once

Exam Tip: Gotchas

The misleading-filing violation is carved out of the general willfulness standard. Every other willful violation is punishable without proof the person knew the statement was false; lying in a filing requires that specific knowledge.

What Should You Check on Exam Day?

• Sort each power into one bucket: Administrator alone, Administrator plus court, or court alone. Subpoena enforcement and injunctions both need a court.
• A cease and desist order needs no prior hearing and no court approval, and the Administrator can pursue it and an injunction together, not just one or the other.
• The trigger for enforcement covers a violation already in progress or one that is merely about to happen.
• Transactional immunity attaches only after the witness claims the privilege, and it never covers perjury, contempt, or federal prosecution.
• Cross-border subpoena assistance is judged against the assisting Administrator's own law, not the requesting state's.
• Remember the maximum criminal penalty ($5,000, 3 years, or both), that a misleading-filing violation alone requires proof of knowledge, and that state criminal law can still reach the same conduct separately.