Quick Answer
The USA provides four remedies: administrative (the Administrator's cease and desist order), judicial (court-ordered injunctions and monetary relief), criminal (fines up to $5,000 and imprisonment up to 3 years for willful violations), and civil (the buyer's private right of action). SIPC is a separate federal program, not a USA remedy, restoring up to $500,000 when a member firm fails.
With the remedy categories under the Uniform Securities Act (USA) covered (civil, criminal, and judicial), plus SIPC coverage for a failed firm, this section brings everything together in a single reference that shows how the enforcement landscape fits together.
What Are the Five Remedy Types and How Do They Compare?
| Remedy Type | Authority | Who Initiates | Key Features |
|---|---|---|---|
| Administrative (cease and desist) | Administrator | Administrator | No prior hearing required; immediate |
| Judicial (injunctions, receivers) | Court | Administrator requests | Admin need not post bond |
| Criminal (fines, imprisonment) | Court | Attorney General/District Attorney (AG/DA) prosecution | Willful violations; max $5,000 fine, max 3 years imprisonment |
| Civil (rescission, damages) | Court | Buyer (private right of action) | Burden on seller for fraud, strict liability for registration; 3-year / 2-year statute of limitations |
| SIPC (asset restoration) | Federal law, not the USA | SIPC liquidation proceeding | Firm failure with missing assets; $500,000 / $250,000 cash sublimit |
Exam Tip: Gotchas
The first four rows are the USA's remedies. SIPC is not one of them. It comes from the federal Securities Investor Protection Act of 1970, and the USA mentions it only once, as a body the Administrator may cooperate with. If a question asks which remedies the Uniform Securities Act provides, SIPC is the wrong answer.
How Does a Violation Move Through the Enforcement System?
Think of it this way: The Administrator is like a detective and traffic cop rolled into one. They can investigate and issue stop orders on their own, but if they want someone fined, jailed, or forced to pay money back, they need a court (or a prosecutor) to make it happen.
- Administrative route: it appears to the Administrator a violation has occurred or is about to occur, so the Administrator issues a cease and desist order (no court needed)
- Judicial route: the Administrator asks a court for an injunction, receiver, rescission, restitution, or disgorgement instead of, or in addition to, a cease and desist order
- Criminal route: the Administrator may refer evidence to the attorney general or district attorney, who may prosecute in court with or without that referral
- Civil route: runs independently of the Administrator. The injured buyer files a private lawsuit, and a court awards rescission or damages
- SIPC route: sits outside this flow entirely. It is not triggered by a violation, but by a member firm failing with customer assets missing. A violation at a solvent firm never reaches SIPC.
What Are the Key Thresholds and Time Limits?
- Criminal fine (maximum): $5,000
- Criminal imprisonment (maximum): 3 years
- Criminal filing period: 5 years (optional, bracketed Model Act language; state law may supply a different general limitation)
- Civil statute of limitations (from sale): 3 years
- Civil statute of limitations (from discovery): 2 years
- Rescission offer response period: 30 days
- SIPC total protection per customer, per capacity: $500,000
- SIPC cash sublimit (inside the $500,000): $250,000
Memory Aid: $5-3
- $5,000 maximum fine
- 3 years maximum imprisonment
The 5-year criminal filing period is optional Model Act language, not a guaranteed nationwide rule, so it does not belong in the fixed-number set above.
Who Can Take Which Action?
| Action | Administrator | Court | AG/DA | Buyer |
|---|---|---|---|---|
| Investigate | Yes | No | No | No |
| Issue cease and desist | Yes | No | No | No |
| Grant injunction | No | Yes | No | No |
| Appoint receiver | No | Yes | No | No |
| Order rescission/restitution | No | Yes | No | No |
| Prosecute criminally | No | Yes (adjudicates) | Yes (institutes) | No |
| Sue for civil damages | No | Yes (forum) | No | Yes (initiates) |
| Refer for criminal prosecution | Yes | No | N/A (receives) | No |
Exam Tip: Gotchas
- The Administrator has broad investigative and administrative power but cannot: (1) prosecute criminally, (2) grant injunctions, (3) appoint receivers, or (4) order monetary relief. Those all require a court.
- The Administrator can: (1) investigate, (2) issue cease and desist orders, (3) deny/suspend/revoke registrations, and (4) refer cases for criminal prosecution.
Where Does the Burden of Proof Fall in Each Context?
| Context | Burden Falls On | Standard |
|---|---|---|
| Civil liability (fraud) | Seller | Did not know + reasonable care |
| Civil liability (registration) | Nobody: strict liability | No defense; care is irrelevant |
| Control person defense | Control person | Did not know + reasonable care |
| Criminal prosecution | State (AG/DA) | Beyond a reasonable doubt + willfulness |
| Imprisonment defense | Defendant | No knowledge of the rule/order |
Exam Tip: Gotchas
- In a civil fraud case, the burden is on the seller to prove innocence (did not know and exercised reasonable care). In criminal cases, the state must prove guilt beyond a reasonable doubt. This reversal catches many students off guard.
- The reasonable-care defense does not reach registration violations. Sell while unregistered, or sell an unregistered security, and you are liable no matter how careful you were.
- The imprisonment defense is narrow. A defendant can avoid prison by proving they had no knowledge of the rule or order violated, but this does not eliminate fines or other penalties.
What Should You Check on Exam Day?
- Can you place each remedy in its correct category: administrative, judicial, criminal, civil, or SIPC?
- Do you know which party initiates each type of action, and which body actually grants it?
- Can you recall the fixed numbers ($5,000 fine, 3 years imprisonment, 3-year/2-year civil limits, 30-day rescission-offer window, $500,000/$250,000 SIPC limits) without mixing up which figure belongs to which remedy?
- Do you know the 5-year criminal filing period is optional Model Act language, not a fixed rule like the civil limits?
- Can you identify that SIPC sits outside the USA's four remedies entirely, triggered by firm failure rather than by any violation?