Denial, Revocation, Suspension, Cancellation, and Withdrawal of IA Registration
This section covers the Administrator's most powerful tools for regulating investment advisers: the ability to deny, suspend, revoke, or cancel registration. The grounds, procedures, and procedural protections are all heavily tested.
Administrator's Authority
The Administrator may:
- Deny, suspend, or revoke any investment adviser (IA) registration
- Bar or censure any registrant or any officer, director, or partner of a registrant from employment with a registered IA
- Restrict or limit a registrant as to any function or activity
ALL actions require a finding that the order is in the public interest.
Exam Tip: Gotchas
- The public interest finding is always the first requirement; without it, no action is valid, regardless of what grounds exist.
Grounds for Denial, Revocation, or Suspension
The Administrator must find BOTH: (1) the order is in the public interest AND (2) one or more of the following grounds exist:
| Ground | Details |
|---|---|
| Filing deficiencies | Application was incomplete, false, or misleading in a material respect |
| Willful violation of securities laws | Willful violation of the Uniform Securities Act (USA), SEC acts (SA '33, SEA '34, IAA '40, ICA '40), or the Commodity Exchange Act |
| Criminal conviction | Conviction within the past 10 years of any misdemeanor involving a security or any aspect of the securities business, or any felony |
| Court injunction | Permanently or temporarily enjoined from engaging in securities business |
| Prior regulatory order | Subject to an order of the Administrator denying, suspending, or revoking registration |
| Adjudication in another jurisdiction | Adjudication within the past 10 years by another securities/commodities agency or court |
| Dishonest or unethical conduct | Engaged in dishonest or unethical practices in the securities business |
| Insolvency | Liabilities exceed assets OR cannot meet obligations as they mature (applies to the IA entity, not just an individual) |
| Foreign jurisdiction violation | Willfully violated foreign securities/banking law OR subject to foreign regulatory action within the past 5 years |
| Lack of qualifications | Insufficient training, experience, or knowledge |
| Failure to supervise | Failed to reasonably supervise investment adviser representatives (IARs) or employees to ensure compliance |
| Failure to pay filing fee | Administrator may only deny (not revoke or suspend); order vacated when deficiency is corrected |
Important Time Periods
- Criminal conviction lookback: 10 years
- Adjudication in another jurisdiction lookback: 10 years
- Foreign jurisdiction violation lookback: 5 years
- Failure to pay filing fee: denial only (not revocation or suspension)
Qualification Standards
The Administrator's authority to deny based on lack of qualifications has important limits:
- For an individual IA, qualifications are assessed based on the individual
- For an IA firm, qualifications are assessed based on the IARs who represent the firm
- The Administrator may NOT deny solely for lack of experience if the applicant is qualified by training or knowledge
- Experience as a broker-dealer or agent does NOT automatically qualify someone as an IA; IA qualifications are evaluated separately
- The Administrator may require an examination (e.g., Series 65 or Series 66) by rule
Summary Suspension
The Administrator may summarily postpone or suspend registration pending final determination of proceedings. This is the emergency action:
- Upon entry of a summary order, the Administrator must promptly notify the registrant of the reasons
- The registrant may request a hearing within 15 days of receiving the order
- If no hearing is requested or ordered, the summary order remains in effect until modified or vacated
Exam Tip: Gotchas
Summary suspension under Section 204(c) is the ONLY action the Administrator can take WITHOUT prior notice and hearing. All other orders (denial, revocation, full suspension) require prior notice, hearing opportunity, and written findings. But even with summary suspension, the registrant can request a hearing within 15 days.
Cancellation vs. Revocation
These two concepts are frequently tested:
- Cancellation (non-punitive): The registrant no longer exists, has ceased doing business, is subject to adjudication of mental incompetence, or cannot be located after a reasonable search.
- Revocation (punitive/disciplinary): Based on one or more of the grounds listed above, combined with a public interest finding.
Cancellation is administrative housekeeping. Revocation is a disciplinary sanction.
Exam Tip: Gotchas
- Cancellation carries no stigma; it is not a punishment. Revocation is a disciplinary action based on misconduct grounds.
Withdrawal of Registration
An IA may withdraw from registration by filing an application. Key timing rules:
- Withdrawal becomes effective 30 days after receipt of the application
- Exception 1: A revocation or suspension proceeding is already pending when the application is filed
- Exception 2: A proceeding is instituted within 30 days after the application is filed
Even after withdrawal, the Administrator may institute a proceeding under Section 204(a)(2)(B) within 1 year after withdrawal became effective.
Exam Tip: Gotchas
- Withdrawal does not stop a proceeding already pending when the application is filed, nor one instituted within the 30-day window.
- The 1-year post-withdrawal window means an IA cannot simply withdraw to escape disciplinary action.
Procedural Protections
No order may be entered (except summary suspension) without:
- Appropriate prior notice to the applicant or registrant
- Opportunity for hearing
- Written findings of fact and conclusions of law
The 90-Day Rule
The Administrator may NOT institute a suspension or revocation proceeding solely on the basis of a prior order that was disclosed by the applicant before registration became effective, unless the proceeding is instituted within 90 days of registration.
This protects applicants who fully disclose their history: if the Administrator grants registration despite knowing about a prior order, they generally cannot later use that same prior order as the sole basis for revocation (unless they act within 90 days).
Exam Tip: Gotchas
- The sequence: grounds exist + public interest finding → Administrator acts → registrant receives notice + hearing opportunity → written findings of fact and conclusions of law.
- The 90-day rule only applies when the prior order was disclosed before registration became effective.