Civil Liabilities
If the Administrator finds that the IA or IAR has unknowingly violated the Act without willful intent, civil liabilities apply. These can include the following:

  • Financial restitution - refunding any money lost from the investments, as well as any fees paid to the adviser
  • Payment of client's attorney's fees
  • Payment of interest on the money invested, net of any income received from the investment

Felony Punishments
Willful violations of the Act can be considered fraudulent, which would make them a felony that can be punished by:

  • Financial restitution - same as above
  • A fine of $5,000 (the amount can vary from state to state)
  • A prison term of up to three years (this can also vary from state to state)

Other Powers
In addition to those already listed, the Administrator has the following powers:

  • To conduct investigations (within and outside the state) to determine if any of the above violations has occurred or is about to occur
  • To cooperate in SEC investigations
  • To publish information concerning such a violation
  • To compel testimony regarding such a violation, even if such testimony might incriminate the individual
  • To subpoena testimony and records from others
  • To issue a cease and desist order without providing a hearing

When it comes to exempt securities transactions, the administrator is permitted to deny or revoke any specific transaction or security exemption but cannot enter the order to do so unless:

a. prior notice is given to all parties,
b. an opportunity is given for a hearing and
c. written findings are provided.

If the administrator issues a summary order to deny or revoke pending final determination, they must notify all interested parties of the reasons for entering the order and inform them that a hearing will be granted within 15 days of a written request.


Exam Tips and Tricks
You should be very familiar with the specific powers of the Administrator and civil versus criminal penalties. Here are two questions that could come up on the exam:

  1. Of the following statements regarding the state Administrator's powers, which are true?
    1. The Administrator may revoke an IA registration for the sole reason that it is "for the public good."
    2. If an IA's registration is suspended, any IARs who work for the IA will have their licenses suspended as well.
    3. If an IAR's registration is suspended, the license of the IA he/she works for is suspended as well.
    4. IAs, but not IARs, may have their registration revoked for failing to properly supervise employees.
    1. I and II only
    2. I and IV only
    3. I, II and III only
    4. II and IV only

The correct answer is "d". If the IA license is suspended, there can be no active IAR registrations, and IAs are responsible for supervising employees (IARs have no such responsibilities).


  1. A state Administrator can take all of the following steps EXCEPT:
    1. Require a witness to testify at a hearing
    2. Inspect an IA who does business in the state, even if the IA is located in another state
    3. Suspend the constitutional privilege against self-incrimination
    4. Coordinate inspections with the SEC

The correct answer is "c". While the Administrator can compel incriminating testimony, the privilege against self-incrimination is a constitutional one, and federal law must supersede state laws.



Administrative Requirements

Related Articles
  1. Financial Advisor

    Series 63, Series 65 Or Series 66?

    When joining the world of investment professionals, you must take the right exams.
  2. Investing

    How Google & Twitter Compete with Facebook's Instant Articles (FB, GOOG)

    Look at how Facebook's Instant Articles feature works, and how it differs from the new Accelerated Mobile Pages feature from Google and Twitter.
  3. Financial Advisor

    Vital Considerations for a Transitioning Advisor

    Advisors who are considering breaking away from a big firm should consider these points.
  4. Financial Advisor

    Social Security File and Suspend: Deadline 4/29

    If you're going to turn 66 by April 29, then now is the time act on the Social Security 'file and suspend' claiming strategy.
  5. Financial Advisor

    Alternatives to Social Security's File & Suspend

    The file and suspend strategy for Social Security will no longer be valid in 2016. Here are some alternatives.
  6. Financial Advisor

    Social Security: How to File and Suspend Online Before 4/29

    If you’re between the ages of 62 and 70, you could add up to $60,000 to your Social Security benefits if you file for and suspend them by April 29.
  7. Financial Advisor

    A Review of SEC Enforcement Cases in 2016

    The SEC set a new record in 2016 for the number of enforcement actions it brought.
  8. Investing

    Getting Your Real Estate License

    Each state has its own rules, regulations and examination for obtaining a real estate license. Find out what you need to know.
  9. Personal Finance

    Policing The Securities Market: An Overview Of The SEC

    Find out how this regulatory body protects the rights of investors.
  10. Financial Advisor

    6 Proven Tips For Series 6 Success

    These techniques can help you pass this test without the added stress.
Frequently Asked Questions
  1. What are the Differences Among a Real Estate Agent, a broker and a Realtor?

    Learn how agents, realtors, and brokers are often considered the same, but in reality, these real estate positions have different ...
  2. What is the difference between amortization and depreciation?

    Because very few assets last forever, one of the main principles of accrual accounting requires that an asset's cost be proportionally ...
  3. Which is better, a fixed or variable rate loan?

    A variable interest rate loan is a loan in which the interest rate charged on the outstanding balance varies as market interest ...
  4. What is the 1003 mortgage application form?

    Learn about the 1003 mortgage application form, what information it requires and why this form is the industry standard for ...
Trading Center