Quick Answer
The Administrator's antifraud authority reaches every security and transaction, exempt or federal covered; fraud is never exempt. The Administrator can issue stop orders, deny/suspend/revoke certain exemptions, investigate suspected violations, issue cease and desist orders, and refer criminal matters to prosecutors. Only some exemptions can be revoked, not "inherently exempt" securities like government or bank securities, and both notice-filing authority and antifraud authority survive NSMIA's preemption of registration.
This section covers the Uniform Securities Act (USA) antifraud authority, the Administrator's enforcement powers, and the ability to revoke exemptions.
Does Antifraud Authority Apply to Exempt and Federal Covered Securities?
The Administrator retains antifraud authority over ALL securities and transactions, including:
- Exempt securities (on the USA exempt-securities list)
- Exempt transactions (on the USA exempt-transactions list)
- Federal covered securities
No exemption from antifraud provisions: fraud is never exempt.
What Enforcement Powers Does the Administrator Have?
The Administrator can:
- Issue stop orders to suspend or revoke the effectiveness of a registration statement
- Deny, suspend, or revoke exemptions for specific securities or transactions under the Administrator's exemption-revocation authority
- Investigate suspected violations
- Issue cease and desist orders
- Refer criminal matters to prosecutors
Which Exemptions Can the Administrator Revoke?
The Administrator can deny, suspend, or revoke exemptions under:
- Exchange-listed securities exemption (USA exempt-securities list)
- Nonprofit organization exemption (USA exempt-securities list)
- Employee benefit plan exemption (USA exempt-securities list)
- All exempt transactions on the USA exempt-transactions list
Which Exemptions Can the Administrator NOT Revoke?
- Government securities
- Bank securities
- Other "inherently exempt" securities cannot have their exemptions revoked by the Administrator
Exam Tip: Gotchas
- The Administrator can revoke certain exemptions (exchange-listed, nonprofit, employee benefit plan, and all exempt transactions) but NOT all exempt securities. Government securities, bank securities, and other inherently exempt securities cannot have their exemptions revoked.
- Even though states cannot require registration of federal covered securities, the Administrator CAN require notice filings AND retains full antifraud enforcement authority. The National Securities Markets Improvement Act (NSMIA) preempts registration but NOT fraud enforcement.
What Should You Check on Exam Day?
- Do you know antifraud authority applies to exempt securities, exempt transactions, and federal covered securities alike, with no exemption from fraud ever?
- Can you list the Administrator's enforcement powers: stop orders, exemption denial/suspension/revocation, investigation, cease and desist orders, and criminal referral?
- Do you know which exemptions the Administrator can revoke (exchange-listed, nonprofit, employee benefit plan, and all exempt transactions) versus cannot revoke (government and bank securities, and other inherently exempt securities)?
- Do you know that NSMIA preempts state registration of federal covered securities but does NOT preempt the Administrator's notice-filing authority or antifraud enforcement authority?