Administrative Actions
The administrator has the power to deny, suspend, or revoke registrations for both persons and securities under the Uniform Securities Act (USA). Two non-disciplinary actions also exist: cancellation and withdrawal.
Two-Part Test for Denial, Suspension, or Revocation
Both conditions must be present. It is not enough to have grounds alone:
- Public interest: The action must be in the public interest, AND
- Specific statutory ground: At least one ground must exist
The administrator cannot act on public interest alone without a triggering ground, and cannot act on a ground alone without a public interest finding. Both prongs are required.
Grounds for Denial, Suspension, or Revocation
| Ground | Key Details |
|---|---|
| (A) Misleading application | Application was incomplete in any material respect or contained false/misleading statements |
| (B) Willful violation | Willfully violated or failed to comply with the USA, Securities Act of 1933, Securities Exchange Act of 1934, Investment Advisers Act of 1940, Investment Company Act of 1940, or Commodity Exchange Act |
| (C) Criminal conviction | Convicted within the past 10 years of any misdemeanor involving a security or securities business, or any felony |
| (D) Enjoined | Permanently or temporarily enjoined from engaging in securities business |
| (E) Subject to state order | Subject to another Administrator's order denying, suspending, or revoking registration |
| (F) Other jurisdiction action | Subject to an adjudication within the past 10 years by another state or federal regulator for willful violations |
| (G) Unethical practices | Engaged in dishonest or unethical practices in the securities business |
| (H) Insolvency | Liabilities exceed assets or cannot meet obligations as they mature |
| (H.1) Foreign violation | Willfully violated foreign jurisdiction securities/banking laws, or subject to foreign regulatory action within past 5 years |
| (I) Not qualified | Not qualified based on training, experience, and knowledge |
| (J) Failure to supervise | Failed reasonably to supervise agents (broker-dealer) or investment adviser representatives (IARs) |
| (K) Unpaid filing fee | Failed to pay proper filing fee (denial only; vacated when corrected) |
Exam Tip: Gotchas
- Felony conviction of any type (not just securities-related) within the past 10 years is grounds for denial, but for misdemeanors, only those involving securities or the securities business qualify. A misdemeanor DUI would NOT be grounds; a misdemeanor for petty theft from a client WOULD be.
- Lack of experience alone cannot be the sole basis for denial if the applicant is qualified by training or knowledge. The Administrator must consider that agents supervised by a registered broker-dealer need not have the same qualifications as the broker-dealer itself.
Summary (Emergency) Actions
The administrator may summarily postpone or suspend registration without a prior hearing.
After a summary action, the administrator must:
- Promptly notify the applicant/registrant and the employer (if agent or IAR)
- State the reasons for the action
- Set the matter for hearing within 15 days of receiving a written request
- If no hearing is requested and none ordered, the summary order remains in effect until modified or vacated
Exam Tip: Gotchas
- A cease and desist order can be issued without a prior hearing. But a denial, suspension, or revocation requires prior notice, hearing opportunity, and written findings, UNLESS it is a summary (emergency) action, which is temporary pending a full hearing.
Cancellation of Registration
The administrator may cancel (not revoke) a registration if the registrant:
- Is no longer in existence or has ceased doing business
- Is subject to an adjudication of mental incompetence
- Cannot be located after reasonable search
Cancellation is non-disciplinary and carries no bar on future re-registration.
Withdrawal from Registration
| Item | Rule |
|---|---|
| Who initiates | The registrant (voluntary) |
| Effective date | 30 days after receipt of the application (or sooner if Administrator determines) |
| Pending proceedings | If a revocation/suspension proceeding is pending when withdrawal is filed, withdrawal becomes effective only on the Administrator's terms |
| Post-withdrawal jurisdiction | Administrator may still institute proceedings within 1 year after withdrawal becomes effective |
Due Process Requirements
No order may be entered (except summary suspension) without:
- Prior notice to the applicant/registrant (and employer if applicable)
- Opportunity for hearing
- Written findings of fact and conclusions of law