Quick Answer
The Administrator may deny, suspend, revoke, bar, censure, or restrict a person's registration only when both a public-interest finding and one of 12 statutory grounds are present. Due process (notice, hearing, written findings) is required for every action except a summary suspension, which is immediate but temporary pending a hearing the registrant must request.
With investigative powers and enforcement tools covered, let's turn to how the Administrator controls who is allowed to operate in the securities industry. This is one of the most detailed and frequently tested topics on the Series 63.
What Actions Are Available Against a Person's Registration?
The Administrator may by order:
- Deny a registration (prevent it from becoming effective)
- Suspend a registration (temporarily halt it)
- Revoke a registration (permanently terminate it)
- Bar a registrant, or any officer, director, partner, or person occupying a similar status or performing similar functions for a registrant, from employment with a registered broker-dealer or investment adviser
- Censure a registrant
- Restrict or limit a registrant as to any function or activity
What Is the Two-Prong Test?
To take any of these actions, the Administrator must find both:
- The order is in the public interest, AND
- One or more of the specific statutory grounds exists
Exam Tip: Gotchas
"In the public interest" alone is not sufficient. The Administrator must also establish at least one specific ground. Conversely, a specific ground alone is not enough; the action must also be in the public interest. Both prongs are always required.
What Are the Grounds for Action?
There are 12 statutory grounds, including a foreign-jurisdiction ground NASAA added later. You need to know all of them:
| Ground | Key Detail |
|---|---|
| False or incomplete application | Application was incomplete or contained false/misleading statements as of the effective date |
| Willful violation | Willfully violated or failed to comply with the USA (or a predecessor state act), or any rule or order under either, or with the Securities Act of 1933, SEA 1934, IAA 1940, Investment Company Act 1940, or Commodity Exchange Act |
| Criminal conviction | Convicted within the past 10 years of any misdemeanor involving a security or any felony |
| Injunction | Currently subject to a permanent or temporary injunction involving the securities business |
| Prior Administrator order | Currently subject to an Administrator's order denying, suspending, or revoking registration |
| Prior adverse determination | Subject of an adjudication within the past 10 years finding willful violation of securities laws |
| Dishonest or unethical practices | Engaged in dishonest or unethical practices in the securities business |
| Insolvency | Liabilities exceed assets, or cannot meet obligations as they mature |
| Foreign jurisdiction violation | Willfully violated foreign securities/banking law, or subject to foreign regulatory action within past 5 years |
| Lack of qualification | Not qualified on the basis of such factors as training, experience, and knowledge of the securities business. Lack of experience alone is never enough: the Administrator may not act solely on that basis if the person is qualified by training or knowledge or both |
| Failure to supervise | broker-dealer (BD) failed to reasonably supervise agents, or investment adviser (IA) failed to reasonably supervise investment adviser representatives (IARs), to assure their compliance with the Act |
| Filing fee | Failed to pay the proper filing fee (denial only, not suspension or revocation) |
What Details Matter for Specific Grounds?
Willful violation: Under the USA, "willfully" means the person acted intentionally (they were aware of what they were doing). It does not require:
- Evil motive
- Intent to violate the law
- Knowledge that the law was being violated
Exam Tip: Gotchas
"Willfully" on the Series 63 does not mean the person intended to break the law. It only means they intended to do the act. A person who unknowingly violates a rule still acted "willfully" if they intended to take the action that turned out to be a violation. This definition is tested repeatedly.
Criminal conviction:
- Only convictions within the past 10 years count
- Any felony qualifies (not just securities-related)
- Misdemeanors must involve securities or the securities business
Injunction: Only a current injunction is grounds; an expired or vacated injunction is not.
Insolvency: The Administrator may not enter an order against a broker-dealer or investment adviser on insolvency grounds without a finding of insolvency as to the firm itself. An agent's insolvency can be used against the agent, but not against the employing BD/IA.
Filing fee: This ground supports only a denial order, and the Administrator must vacate the order when the deficiency is corrected.
What Limits the Administrator's Timing?
- The Administrator may not start a suspension or revocation proceeding solely on the basis of a final judicial or administrative order the applicant disclosed before registration became effective, unless the proceeding is instituted within 90 days following registration
- A "final judicial or administrative order" does not include one that is stayed or subject to further review or appeal
- This 90-day limitation does not apply to renewal registrations
- Note the contrast with securities registrations: a stop order against an effective securities registration gets only 30 days, and it is limited by any fact or transaction the Administrator knew at effectiveness, not just a disclosed order
- The Administrator may not enter an order against a BD on the basis of lack of qualification of anyone other than the BD itself (if an individual) or an agent of the BD
- The Administrator may not enter an order solely on the basis of lack of experience if the applicant is qualified by training or knowledge
How Does Summary Suspension Work?
The Administrator may by order summarily postpone or suspend a registration pending final determination of any proceeding. This is a temporary, immediate action.
Upon entry of the summary order, the Administrator must promptly notify the person (and the employer or prospective employer if the person is an agent or IAR) that:
- The order has been entered
- The reasons for the order
- Within 15 days after receipt of a written request, the matter will be set down for a hearing
| If the registrant... | Then... |
|---|---|
| Requests a hearing (in writing) | The matter is set down for hearing within 15 days after the Administrator receives the request |
| Does not request a hearing | The summary order remains in effect until modified or vacated |
| The Administrator orders a hearing | The order may be modified, vacated, or extended until final determination |
Exam Tip: Gotchas
Summary suspension can happen without a prior hearing; it is immediate. The registrant has the right to request a hearing in writing, and once the Administrator receives that request the matter must be set down for hearing within 15 days. Read the clock carefully: the 15 days is the Administrator's deadline to schedule the hearing, not a deadline for the registrant to ask for one. The Act sets no time limit on making the request, but if none is requested and none is ordered, the summary order simply stays in effect until modified or vacated. This balances investor protection (immediate action) with due process (opportunity to be heard).
What Due Process Is Required?
No order against a registrant (except for summary suspensions) may be entered without all three:
- Appropriate prior notice to the applicant or registrant (and the employer or prospective employer if the person is an agent or IAR)
- Opportunity for hearing
- Written findings of fact and conclusions of law
| Type of Action | Prior Hearing Required? | Notice Required? | Written Findings? |
|---|---|---|---|
| Summary suspension | No (immediate) | Yes (after entry) | No (pending final determination) |
| All other registration orders | Yes (prior notice and opportunity for hearing required) | Yes (before entry) | Yes |
When Can the Administrator Cancel a Registration?
The Administrator may cancel a registration or a pending application if the registrant or applicant:
- Is no longer in existence or has ceased to do business
- Is subject to an adjudication of mental incompetence or to the control of a committee, conservator, or guardian
- Cannot be located after reasonable search
Cancellation is a ministerial/housekeeping action; it removes inactive registrations and applications from the files. It is not a punitive measure.
What Happens When a Person Withdraws From Registration?
- Withdrawal becomes effective 30 days after receipt of the application (or a shorter period determined by the Administrator)
- Exception: if a revocation or suspension proceeding is pending when the application is filed, or if one is instituted within 30 days after filing, withdrawal does not automatically become effective. Instead, it becomes effective only at the time and on the conditions the Administrator orders
- Even after withdrawal becomes effective, the Administrator may institute proceedings for willful violations within 1 year after withdrawal, entering the order as of the last date registration was effective
Exam Tip: Gotchas
A person cannot escape regulatory action by withdrawing. The Administrator has 30 days to start proceedings before the withdrawal takes effect, and even after it takes effect, the Administrator has 1 year to pursue action, but only for willful violations under Clause (B), not for the other 11 grounds.
What Should You Check on Exam Day?
- Every action needs both prongs: public interest AND at least one of the 12 statutory grounds.
- "Willfully" means the person intended the act, not that they intended to break the law.
- Only a summary suspension skips prior notice and hearing; everything else needs all three due process elements.
- The 90-day window on a disclosed prior order applies only to suspension or revocation of a person's registration, never to renewals, and never when the order is stayed or under appeal.
- Withdrawal is not an escape hatch: the Administrator gets 30 days to act before it is effective and 1 year after for willful violations.