Quick Answer
The Administrator can deny, suspend, or revoke an agent's registration only when both a public-interest finding and a specific statutory ground are present, and only after notice, a hearing opportunity, and written findings, except for a summary suspension pending a proceeding. Cancellation is separate, non-punitive housekeeping. Withdrawal takes 30 days and cannot dodge a pending proceeding.
With registration and post-registration obligations in place, the next question is: what can the Administrator do if an agent falls short? The Uniform Securities Act (USA) gives the Administrator broad authority, but with important procedural safeguards.
The Two-Prong Test for Administrative Action
The Administrator may deny, suspend, or revoke any agent's registration only if the Administrator finds BOTH:
- The order is in the public interest, AND
- One or more specific statutory grounds under the USA applies
- Both prongs must be satisfied
- A statutory ground alone is not sufficient without a public interest finding
- A public interest finding alone is not sufficient without a statutory ground
Exam Tip: Gotchas
- Both prongs are required. Public interest AND a statutory ground must both be present. Neither alone is enough to deny, suspend, or revoke.
Grounds for Denial, Suspension, or Revocation
| Ground | Details |
|---|---|
| False or incomplete application | The agent filed an application that was incomplete in any material respect or contained a false or misleading statement as of its effective date |
| Willful violation | Willful violation of the USA, a predecessor act, or any federal securities law (SA 1933, SEA 1934, IAA 1940, ICA 1940, 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 (regardless of whether securities-related) |
| Injunction | Permanently or temporarily enjoined by a court from engaging in conduct involving any aspect of the securities business |
| Prior administrative order | Subject to an order of this state's Administrator denying, suspending, or revoking registration as a broker-dealer, agent, or IA/IAR. Another state's action is a separate ground (see the next row), and it requires an adjudication finding a willful violation |
| Other state/federal adjudication | Subject to an adjudication or determination, after notice and opportunity for hearing, within the past 10 years, by a securities or commodities agency of another state or a court of competent jurisdiction, finding a willful violation |
| Dishonest or unethical practices | Engaged in dishonest or unethical practices in the securities business |
| Insolvency | Insolvent (liabilities exceed assets, or cannot meet obligations as they mature). An agent's own insolvency IS a valid ground against the agent's registration (an agent is a registrant). The only limit: the Administrator may not use the agent's insolvency against the agent's employing broker-dealer (BD) |
| Foreign jurisdiction violations | Willful violation of a foreign securities/banking law, or within the past 5 years subject to a foreign regulator's action denying, revoking, or suspending the right to engage in the securities business, or subject to a foreign exchange or self-regulatory organization (operating under that foreign regulator's authority) suspending or expelling the agent from membership |
| Lack of qualifications | Not qualified based on training, experience, and knowledge |
| Failure to pay filing fee | Administrator may enter only a denial order (not suspension or revocation), and must vacate the order when the deficiency is corrected |
Important Time Limits in the Grounds
- Criminal conviction: 10 years (felony: any type; misdemeanor: only if securities-related)
- Other state/federal adjudication: 10 years
- Foreign jurisdiction action: 5 years
Exam Tip: Gotchas
- Felonies do NOT need to be securities-related. Any felony conviction within 10 years is grounds. Misdemeanors, however, must involve a security or the securities business.
- Failure to pay the filing fee can only result in denial, not suspension or revocation. And the Administrator must vacate the denial once the fee is paid.
Special Rules for Qualification-Based Denials
The Administrator has limits when denying based on lack of qualifications:
- An agent who works under the supervision of a registered BD need not have the same qualifications as a BD itself
- The Administrator may NOT deny solely on the basis of lack of experience if the applicant is qualified by training or knowledge (or both)
- The Administrator may require an examination (such as the Series 63) as a condition of registration
Summary Suspension
This is the one exception to the general rule requiring prior notice and hearing:
- The Administrator may summarily postpone or suspend an agent's registration pending final determination of any proceeding
- A summary suspension can be entered without a prior hearing
- Upon entry of the order, the Administrator must promptly notify, stating the reasons for the order and that a written request will get a hearing set down within 15 days:
- The agent
- The agent's employer (or prospective employer)
- Once the agent submits a written request for a hearing, the Administrator must set the matter down for hearing within 15 days of receiving that request (the Act sets no deadline for the agent to make the request)
- If no hearing is requested and none is ordered, the summary suspension remains in effect until modified or vacated
Exam Tip: Gotchas
- A summary suspension can be entered WITHOUT a prior hearing. This is the one exception to the general procedural rules. But the agent must be promptly notified, and once the agent files a written request the matter must be set down for hearing within 15 days. The 15 days is the Administrator's deadline to schedule, not the agent's deadline to ask.
Cancellation
Cancellation is a housekeeping tool, NOT a disciplinary action. The Administrator may cancel an agent's registration if the agent:
- Is no longer in existence
- Has ceased to do business as an agent
- Is subject to an adjudication of mental incompetence or to the control of a committee, conservator, or guardian
- Cannot be located after reasonable search
| Action | Nature | Purpose |
|---|---|---|
| Cancellation | Non-punitive | Clean up inactive registrations |
| Revocation | Punitive | Discipline for misconduct |
| Suspension | Punitive | Temporary discipline |
| Denial | Preventive | Block unfit applicants |
Exam Tip: Gotchas
- Cancellation is NOT punitive. It is a housekeeping tool for cleaning up inactive registrations. Revocation is the punitive action for misconduct.
Withdrawal
An agent may withdraw from registration, but cannot "withdraw under fire":
- Withdrawal becomes effective 30 days after receipt of the withdrawal application, or within a shorter period the Administrator sets, unless:
- A revocation or suspension proceeding is pending when the application is filed, OR
- A proceeding to revoke, suspend, or impose conditions on the withdrawal is instituted within 30 days after the application is filed
- If a proceeding is pending or timely instituted, withdrawal instead becomes effective at the time and on the conditions the Administrator sets by order
- Even when withdrawal becomes effective with no proceeding pending or instituted, the Administrator may still institute a proceeding within 1 year for willful violations under the USA, entering the order as of the last date the registration was effective
Exam Tip: Gotchas
- Withdrawal does NOT escape pending proceedings. If a revocation or suspension proceeding is pending (or gets started within 30 days), the withdrawal is blocked, and even a proceeding that merely seeks to impose conditions on the withdrawal is enough to block automatic effectiveness.
Procedural Requirements
No order may be entered against an agent's registration (except a summary suspension) without:
- Appropriate prior notice to the agent AND the agent's employer
- Opportunity for hearing
- Written findings of fact and conclusions of law
The 90-Day Rule
This rule prevents the Administrator from "sandbagging" agents:
- The Administrator may NOT institute a suspension or revocation proceeding solely on the basis of a final judicial or administrative order that the applicant disclosed to the Administrator before the registration became effective
- Unless the proceeding is instituted within 90 days following registration
- After 90 days, the Administrator needs a different ground
- A "final judicial or administrative order" does NOT include an order that is stayed or subject to further review or appeal
- This rule does NOT apply to renewal registrations; only initial registrations
Exam Tip: Gotchas
- The 90-day sandbagging rule only applies to initial registration. If the applicant disclosed a prior order and the Administrator registered the agent anyway, it has only 90 days to use that order as a basis for revocation. After 90 days, a different ground is needed. This protection does NOT apply at renewal time.
- The bar reaches suspension and revocation only, not denial. And an order that is stayed or still subject to review or appeal is not "final," so it does not start the clock.
What Should You Check on Exam Day?
- Denial, suspension, and revocation each require BOTH a public-interest finding and a statutory ground; cancellation requires neither
- Felonies count regardless of subject matter; misdemeanors count only if securities-related, both within a 10-year lookback
- Failure to pay the filing fee supports denial only, and must be vacated once the fee is paid
- A summary suspension needs no prior hearing, but the Administrator must promptly notify the agent and employer and set a requested hearing within 15 days
- The 90-day sandbagging rule applies only to a disclosed order and only at initial registration, never renewal
- Withdrawal takes effect in 30 days unless a proceeding is pending or started within that window; willful-violation proceedings can still follow within 1 year after withdrawal