Cease and Desist Orders
Now that you understand the Administrator's investigative powers, let's look at the first enforcement tool available once a violation is found: the cease and desist order.
Authority (USA Section 408(a))
When the Administrator believes that any person has engaged or is about to engage in any act constituting a violation of the Act, the Administrator may issue a cease and desist order.
- The order directs the person to stop the prohibited activities
- This is the Administrator's most immediate enforcement tool
- It does not require court involvement
Key Characteristics
| Feature | Detail |
|---|---|
| Prior hearing required? | No (can be issued without a prior hearing) |
| Court involvement? | No (this is an administrative order) |
| Who issues it? | The Administrator (not a court) |
| Scope | Directs the person to cease and desist from further illegal activity |
| Target | Any person (registered or unregistered) |
| Trigger | Violation has occurred OR is about to occur (preventive) |
Exam Tip: Gotchas
- The cease and desist order can be issued before a violation is complete. The Administrator does not need to wait for harm to occur.
Why This Matters
The cease and desist order is the only enforcement tool that requires neither court approval nor a prior hearing. This makes it the fastest way to stop securities violations in progress.
Think of it this way: The cease and desist order is the Administrator's "stop right now" tool. It takes effect immediately, and the person must comply while any further proceedings take place.
Exam Tip: Gotchas
- No court, no hearing: the cease and desist order is the only enforcement remedy that requires neither court approval nor a prior hearing. Frequently tested distinction.
- Injunctions require court action.
- Criminal penalties require a court conviction.
- The exam tests which remedies require court involvement and which do not.