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The Administrator, Enforcement, and Liability
The last section of the exam covers the official who runs the state securities program and the remedies available when the act is broken. The recurring theme is the division of labor between the Administrator and the courts. The Administrator investigates, subpoenas, issues cease and desist orders, and denies, suspends, or revokes registrations; courts issue injunctions, impose criminal sentences, and review final orders. Alongside those public remedies sits a private one: an investor who was sold securities unlawfully can sue to get the money back, and a firm that discovers its own violation can cut off that liability with a proper rescission offer.
Jurisdiction and Scope of Authority
The Administrator is the state official or agency charged with administering the securities act. Jurisdiction attaches to an offer or sale that originates in the state, is directed into and received in the state, or is accepted in the state, which means a single telephone call or letter can bring two states into play. Two exceptions narrow the reach: offers appearing in a bona fide newspaper published outside the state and offers in radio or television broadcasts originating outside the state are not deemed made in the state. Because the act reaches offers as well as sales, the Administrator may act even where nothing was ever bought.
Basis for jurisdiction
An offer or sale falls under a state's act if it originated there, was directed into and received there, or was accepted there.
Uniform Securities ActOffers count
The act applies to offers to buy or sell, not only to completed sales.
Uniform Securities ActMedia exception
Offers in a newspaper published outside the state, or in a broadcast originating outside the state, are not deemed made in the state.
Uniform Securities ActRulemaking
The Administrator may make, amend, and rescind rules, forms, and orders necessary to carry out the act; a rule cannot be enforced against a person with no notice of it.
Uniform Securities ActNo waiver
Any condition or agreement purporting to waive compliance with the act is void.
Uniform Securities ActInvestigations and Administrative Orders
The Administrator may investigate suspected violations inside or outside the state, administer oaths, subpoena witnesses and records, and require written statements under oath. None of this depends on a criminal charge, and refusal to comply is addressed by asking a court to compel obedience. On the enforcement side the Administrator may issue a cease and desist order with or without a prior hearing, and may summarily postpone or suspend a registration while a proceeding is pending, subject to prompt written notice and a hearing on request. What the Administrator cannot do is equally testable: injunctions and imprisonment come only from a court.
Investigative powers
The Administrator may investigate in or outside the state, administer oaths, subpoena witnesses and documents, and require sworn written statements.
Uniform Securities ActCease and desist
May be issued with or without a prior hearing, but enforcement through an injunction requires going to court.
Uniform Securities ActDenial, suspension, revocation
Requires a finding that the order is in the public interest and that a statutory ground exists, with notice, opportunity for hearing, and written findings.
Uniform Securities ActLack of experience
Training, experience, and knowledge may be considered, but a registration may not be denied to an individual solely for lack of experience.
Uniform Securities ActSummary action
A registration may be summarily postponed or suspended pending final determination, with prompt written notice and a hearing promptly scheduled on request.
Uniform Securities ActLimits on power
The Administrator cannot issue injunctions, impose prison sentences, or award damages; those are judicial functions.
Uniform Securities ActCivil Liability, Rescission, and Penalties
A purchaser who bought securities in a sale that violated the registration or antifraud provisions may sue to recover the price paid plus interest, less any income received on the security, together with court costs and reasonable attorney's fees, upon tendering the security back. A seller who discovers the violation first can head off that suit by making a written rescission offer that discloses the violation and offers the same amount; if the purchaser does not accept within the period the act allows, the right to sue is lost. Willful violations are separately punishable as crimes, prosecuted in court by the appropriate prosecuting authority after the Administrator refers the evidence.
Civil remedy
Recovery equals the consideration paid plus interest, less income received, plus costs and reasonable attorney's fees, upon tender of the security.
Uniform Securities ActRescission offer
A written offer disclosing the violation and offering the price paid plus interest cuts off the right to sue if not accepted within the period specified by the act.
Uniform Securities ActCriminal penalties
A willful violation is punishable by a fine, imprisonment, or both, with prosecution generally required to begin within five years of the alleged violation.
Uniform Securities ActWho prosecutes
The Administrator refers evidence to the attorney general or the proper prosecuting attorney, who decides whether to bring charges.
Uniform Securities ActWho may be liable
Liability can extend beyond the seller to firms and individuals who materially aided the sale, subject to available defenses.
Uniform Securities ActRecords, Service of Process, and Judicial Review
Registration carries with it an obligation to make and keep the records the Administrator prescribes and to submit to examinations at reasonable times and as often as necessary, whether the records sit inside the state or elsewhere. Filings must be kept current, so information that becomes materially inaccurate must be promptly amended. The consent to service of process filed with the original application lets the Administrator accept legal papers on a registrant's behalf with the same effect as personal service, which is what makes out-of-state firms reachable. A registrant who disagrees with a final order may petition the appropriate court for review within sixty days, though filing the petition does not by itself suspend the order.
Recordkeeping
The Administrator may by rule require registrants to make and preserve specified records for prescribed periods.
Uniform Securities ActExaminations
Records may be examined within or outside the state, at any reasonable time and as often as necessary, announced or unannounced.
Uniform Securities ActAmending filings
Information in an application that becomes materially inaccurate or incomplete must be promptly corrected by amendment.
Uniform Securities ActConsent to service of process
Service on the Administrator has the same force as personal service on the registrant, and the consent remains in effect permanently.
Uniform Securities ActJudicial review
A final order may be reviewed on a written petition filed within sixty days; filing does not automatically stay the order.
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