Quick Answer
The Administrator can deny or revoke exchange-listed, nonprofit, and employee benefit plan security exemptions, plus any exempt transaction. Government, financial-institution, and commercial paper exemptions are immune. Revocation requires prior notice, a hearing opportunity, and written findings, except for a summary order pending final determination, which cannot apply retroactively.
Which exemptions the Administrator can revoke is a fixed, memorizable list. Getting the procedural sequence right (notice, hearing, findings) matters just as much as knowing which category is at stake.
Can the Administrator Deny or Revoke an Exemption?
Under the Uniform Securities Act (USA), the Administrator may by order deny or revoke certain exemptions, but not all of them.
Exemptions the Administrator CAN Revoke
Exempt securities subject to revocation:
- Exchange-listed securities
- Nonprofit organization securities
- Employee benefit plan securities
Exempt transactions:
- All exempt transaction exemptions can be denied or revoked
Exemptions the Administrator CANNOT Revoke
The Administrator has no authority to revoke exemptions for:
- (1) Government securities (U.S., state, municipal)
- (2) Canadian and foreign government securities
- (3) Bank securities
- (4) Savings and loan securities
- (5) Insurance company securities
- (6) Credit union securities
- (7) Railroad, utility, and holding company securities
- (10) Commercial paper
| Exempt Securities | Can Administrator Revoke? |
|---|---|
| Government, bank, insurance, utility, and similar institutional issuers | No: immune from revocation |
| Exchange-listed | Yes |
| Nonprofit | Yes |
| Commercial paper | No: immune from revocation |
| Employee benefit plan | Yes |
| All exempt transactions | Yes |
Exam Tip: Gotchas
The pattern to remember: government-related and financial-institution securities plus commercial paper are immune from revocation. The Administrator can only revoke exemptions for exchange-listed, nonprofit, and employee benefit plan securities, plus all exempt transactions. An order reaches a specific security or transaction, not the whole category. Revoking the exchange-listed exemption for one issuer's stock does not strip every exchange-listed security in the state of its exemption.
What Procedure Must the Administrator Follow to Revoke an Exemption?
No order denying or revoking an exemption may be entered without:
- Appropriate prior notice to all interested parties
- Opportunity for hearing
- Written findings of fact and conclusions of law
Summary Orders (Pending Final Determination)
The Administrator may act summarily (without prior hearing) to deny or revoke an exemption pending a final determination. After entering a summary order:
- The Administrator must promptly notify all interested parties
- A hearing must be set within 15 days of receiving a written request
- If no hearing is requested and none is ordered by the Administrator, the summary order remains in effect until modified or vacated
No Retroactive Effect
No denial or revocation order may operate retroactively. This means the revocation only affects future transactions; it cannot undo transactions that were lawfully completed before the order was entered.
Exam Tip: Gotchas
A summary order is not the end of due process, it defers it. The Administrator must still promptly notify affected parties and set a hearing within 15 days of a written request. Skip the request, and the summary order simply stays in effect until the Administrator modifies or vacates it.
Is There a Good Faith Defense to a Revocation Order?
A person is not considered to have violated the securities registration requirement or the requirement to file sales and advertising literature by reason of any offer or sale effected after the entry of a denial OR revocation order if the person proves that they:
- Did not know of the order, AND
- In the exercise of reasonable care, could not have known of the order
This provides a defense for persons who act in good faith and without knowledge of the revocation. However, it requires proving both lack of actual knowledge and the exercise of reasonable care; negligence is not excused.
What Should You Check on Exam Day?
- The immune list is fixed: government-related, financial-institution, and commercial paper exemptions can never be revoked, no matter the facts.
- Exchange-listed, nonprofit, and employee benefit plan securities, plus every exempt transaction, are the only categories the Administrator can revoke.
- A summary order skips the prior hearing but never skips notice, and it can never apply retroactively.
- The good faith defense requires both no actual knowledge and no way to have known with reasonable care; simple ignorance is not enough on its own.