Quick Answer
USA criminal penalties apply only to willful violations, with a maximum $5,000 fine and 3 years imprisonment per violation, prosecuted by the attorney general or district attorney rather than the Administrator, within a 5-year statute of limitations. Federal Investment Advisers Act penalties are higher: up to
Quick Answer: USA criminal penalties apply only to willful violations, with a maximum $5,000 fine and 3 years imprisonment per violation, prosecuted by the attorney general or district attorney rather than the Administrator, within a 5-year statute of limitations. Federal Investment Advisers Act penalties are higher: up to $10,000 and 5 years imprisonment.
0,000 and 5 years imprisonment.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.
What Are the 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.
What Are the 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.
What Should You Check on Exam Day?
- Only willful violations are criminal under the USA; inadvertent violations are not
- USA maximum penalties: $5,000 fine and 3 years imprisonment per violation, fine and/or imprisonment
- Filing provisions are excepted from criminal penalties unless the filing was knowingly false
- A person cannot be imprisoned for violating a rule or order if they prove they had no knowledge of it
- No indictment or information more than 5 years after the alleged violation (the "5-5-3" memory aid)
- The Administrator refers evidence to the attorney general or district attorney; the Administrator does not prosecute directly
- Federal IAA criminal penalties are higher than the USA's: up to $10,000 and 5 years imprisonment per violation