Remedies and Administrative Provisions - Civil Liabilities, Felony Punishments and Other Powers
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
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)
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:
- Of the following statements regarding the state Administrator's powers, which are true?
- The Administrator may revoke an IA registration for the sole reason that it is "for the public good."
- If an IA's registration is suspended, any IARs who work for the IA will have their licenses suspended as well.
- If an IAR's registration is suspended, the license of the IA he/she works for is suspended as well.
- IAs, but not IARs, may have their registration revoked for failing to properly supervise employees.
- I and II only
- I and IV only
- I, II and III only
- 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).
- A state Administrator can take all of the following steps EXCEPT:
- Require a witness to testify at a hearing
- Inspect an IA who does business in the state, even if the IA is located in another state
- Suspend the constitutional privilege against self-incrimination
- 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 supers
ProfessionalsRead an in-depth comparison about working as a Financial Analyst vs. working as an Investment Banker, two highly prestigious business careers.
ProfessionalsMost states require individuals to pass the Series 65 exam in order to act as investment advisors.
Personal FinanceRIAs and brokers are held to different standards when providing investment advice. Here's how they differ.
Investing BasicsBrokers and registered investment advisors have some key differences. Here's what you need to know.
ProfessionalsUpon successful completion of the Series 6, an individual will have the qualifications needed to sell open end mutual funds and variable annuities
ProfessionalsGunning to be a stock broker and want an edge? Here's some veteran advice.
Trading Systems & SoftwareLaunching your own broker-dealer is a lot of work, but the potential payoff is great, both personally and financially.
ProfessionalsSeries 63 is a securities license that entitles the holder to sell securities in a particular state.
ProfessionalsLearn how to answer option questions on the Series 7 exam. Pass your Series 7 exam with the help of these tips.
InsuranceLearn to distinguish between general obligation and revenue bonds to ace this test.
A securities license entitling the holder to register as a limited ...
A examination to ensure a candidate is qualified to become a ...
A person who prepares investigative reports on equity securities. ...
An exam required for individuals seeking to engage in off-exchange ...
One who provides financial advice or guidance to customers for ...
An exam offered by the Financial Industry Regulatory Authority ...
Financial advisors are not required to have university degrees. However, they are required to pass certain exams administered ... Read Full Answer >>
Financial advisors must possess various securities licenses in order to sell investment products. The specific products an ... Read Full Answer >>
The Series 6 Investment Company and Variable Contracts Products Representative Qualification Examination is administered ... Read Full Answer >>
There are several highly acclaimed private Series 6 Exam courses in the United States. Many can be completed online. Popular ... Read Full Answer >>
The Series 6, or the Investment Company Products/Variable Contracts Limited Representative, exam is administered by the Financial ... Read Full Answer >>
The Financial Industry Regulatory Authority (FINRA) offers a variety of licenses that must be obtained before conducting ... Read Full Answer >>