Denial, Revocation, Suspension, Cancellation, and Withdrawal
Now that you understand how agents register and maintain their registrations, the next critical area is how those registrations can be taken away. USA Section 204 gives the Administrator broad authority to act against agents, but with important safeguards.
Administrator's Authority
The Administrator may take several actions against an agent's registration:
- Deny an initial registration application
- Suspend an existing registration (temporary)
- Revoke an existing registration (permanent)
- Cancel a registration (non-punitive)
- Condition or restrict a registration (limit specific activities)
- Bar or censure the agent
All actions require two conditions: (1) the action must be in the public interest AND (2) it must be based on one or more of the specified grounds below.
Grounds for Action Against an Agent
| Ground | Details |
|---|---|
| Filing deficiencies | Application was incomplete, false, or misleading in a material respect |
| Willful violation | Willful violation of the USA, predecessor act, any rule/order, or federal securities laws (SA 1933, SEA 1934, IAA 1940, ICA 1940, CEA) |
| Criminal conviction | Conviction within the past 10 years of any misdemeanor involving a security or the securities business, or any felony (regardless of subject matter) |
| Injunction | Permanently or temporarily enjoined from engaging in the securities business |
| Prior regulatory action | Subject to an order denying, suspending, or revoking registration |
| Other state/federal action | Subject to an adjudication within the past 10 years by another regulator finding willful violation |
| Dishonest or unethical conduct | Engaged in dishonest or unethical practices in the securities business |
| Insolvency | Insolvent; but insolvency alone is not a basis for action against an individual agent (only against a BD or IA) |
| Foreign jurisdiction violation | Willful violation of a foreign securities/banking law, or subject to a foreign regulator's action within the past 5 years |
| Lack of qualifications | Not qualified based on training, experience, and knowledge |
| Failure to supervise | Failed to reasonably supervise agents or employees (primarily applies to BDs, but supervisory agents can face this ground too) |
| Failure to pay filing fee | Denial only; Administrator must vacate the order when the deficiency is corrected |
Exam Tip: Gotchas
Both felonies (any type, including non-securities felonies) and securities-related misdemeanors within the past 10 years are grounds for action. A non-securities misdemeanor (e.g., a DUI) is NOT grounds for action. Also note that insolvency can be used against BDs and IAs but generally not against individual agents.
Due Process Requirements
The Administrator cannot act without following proper procedures:
- Prior notice and an opportunity for hearing must be provided before issuing a final order
- Exception: In an emergency, the Administrator may issue a summary order (effective immediately) with a hearing to follow promptly
- The 90-day rule: The Administrator may not institute a proceeding solely on the basis of facts known before the effective date of registration, unless the proceeding is instituted within 90 days of registration becoming effective
Cancellation vs. Revocation
These two actions are fundamentally different:
| Action | Nature | Basis |
|---|---|---|
| Cancellation | Non-punitive | Agent no longer exists, has ceased activity, or cannot be located |
| Revocation | Punitive (disciplinary) | Based on misconduct or violation of grounds listed above |
Exam Tip: Gotchas
- Cancellation is NOT discipline. An agent whose registration is cancelled because they moved out of the industry has no disciplinary record. Revocation is a disciplinary sanction that must be disclosed on Form U4.
Withdrawal of Registration
An agent may voluntarily withdraw from registration:
- Withdrawal is initiated by filing a withdrawal application
- Withdrawal becomes effective 30 days after filing, unless the Administrator institutes a proceeding
- If a proceeding is pending, withdrawal does not take effect until the proceeding is resolved