Administrative Actions

Now that you understand the administrator's powers, let's look at the specific actions the administrator can take against registrants, and the due process protections that apply.

Denial, Suspension, and Revocation of Registration

The administrator may deny, suspend, revoke, or condition the registration of:

• Broker-dealers
• Agents
• Investment advisers
• Investment adviser representatives (IARs)
• Securities (the administrator can also suspend or revoke a security's registration)

Grounds for Administrative Action

The administrator can act against a registration for any of these reasons:

• Filing an incomplete, misleading, or materially false application
• Conviction of any felony (securities-related or otherwise) within the past 10 years
• Conviction of a misdemeanor involving securities or financial dishonesty (no time limit specified)
• Currently subject to an order of another state or federal regulator
• Engaging in dishonest or unethical practices
• Being insolvent (applies to broker-dealers and investment advisers, not individuals/agents)
• Failure to supervise agents or IARs
• Willful violation of the act or any rule or order under the act
• Being subject to a cease and desist order by another jurisdiction

Exam Tip: Gotchas

Insolvency is grounds for action against broker-dealers and investment advisers (firms), but NOT against individual agents or IARs. A person can be personally broke and still be registered; it's the firm's financial health that matters.

Felony vs. Misdemeanor Distinction

Exam Tip: Gotchas

A felony conviction within the past 10 years is grounds for action even if it has nothing to do with securities. A DUI felony from 8 years ago? That counts. But a misdemeanor must be related to securities or financial dishonesty to matter.

Due Process Requirements

The USA requires fairness before the administrator can take action:

• Prior notice and opportunity for hearing must be given before denial, suspension, or revocation
• The registrant has the right to know the grounds for the action
• The registrant has the right to present evidence and arguments
• The registrant has the right to judicial review of any final administrative order (appeal to the courts)

Summary (Emergency) Orders

There is one critical exception to the "hearing first" rule:

• The administrator may issue a summary order to suspend or deny a registration without a prior hearing if:
  • It is in the public interest, AND
  • There is an imminent threat to the public
• After issuing a summary order, a hearing must be provided within 15 days of the registrant's request
• If a hearing is not requested within 15 days, the order becomes final

Exam Tip: Gotchas

A summary order is the ONLY way the administrator can act without a prior hearing. It requires both public interest AND imminent threat. The 15-day window is for the registrant to request a hearing. The clock starts when the registrant receives the order. If they don't request a hearing, the order sticks permanently.

Cease and Desist Orders

• The administrator may issue cease and desist orders when a person is engaged in or about to engage in acts constituting a violation
• Can be issued with or without a prior hearing (summary cease and desist)
• Unlike registration actions, cease and desist orders can target anyone (not just registered persons)
• The purpose is to stop the conduct immediately, not to punish

Exam Tip: Gotchas

• Cease and desist orders can target anyone, not just registered persons. Registration actions (denial, suspension, revocation) only apply to registrants.
• A cease and desist order can be issued when someone is about to violate the act, not only after a violation has occurred.