Criminal Penalties
Criminal penalties under the Uniform Securities Act (USA) apply to willful violations. The administrator does not prosecute criminal cases directly; it refers evidence to the state attorney general or district attorney for prosecution. The attorney general may also act independently.
USA Criminal Penalties
| Element | Detail |
|---|---|
| Standard | Willful violation of any provision of the act (except filing provisions, unless knowingly false) |
| Maximum fine | $5,000 per violation |
| Maximum imprisonment | 3 years per violation |
| Combined | Fine and/or imprisonment |
| Defense | No imprisonment for violating a rule/order if person proves they had no knowledge of the rule/order |
| Criminal statute of limitations | No indictment or information more than 5 years after the alleged violation |
Memory Aid: 5-5-3: $5,000 fine, 5-year statute of limitations, 3 years prison. All the numbers are 5 or under.
Exam Tip: Gotchas
- "Willful" is the required element. Inadvertent violations are NOT criminal offenses under the USA.
Investment Advisers Act of 1940 Criminal Penalties (Federal)
| Element | Detail |
|---|---|
| Maximum fine | $10,000 per violation |
| Maximum imprisonment | 5 years per violation |
Exam Tip: Gotchas
- USA penalties ($5,000 fine / 3 years prison) vs. Investment Advisers Act (IAA) of 1940 penalties ($10,000 fine / 5 years prison). Know both. The USA penalties are lower because they are state-level.