Criminal penalties arise when a person or an entity is proven guilty of consciously and willingly conducting a fraudulent securities transaction (in violation of the USA).


Look Out!
The key word in criminal liabilities is "fraudulent", meaning the violation was deliberate.


Once the Administrator makes an order (which can lead to fines and/or imprisonment), the person or entity affected may retort with a written petition of appeal within 60 days.


At the same time, the affected member (agent or broker-dealer) must serve the Administrator as well. Following this, the Administrator is obligated to provide the appropriate court with all evidence.

Unlike the normal judicial process, once the Administrator makes an order, it remains in effect until a court of law overturns it. Whatever the court decides in appeal is final, and the court has the right to change any part of the order.

Conviction
If the offender is convicted, he or she may not be imprisoned for more than three years, or pay more than $5,000 in fines (per violation).

Statute of Limitations
The statute of limitations for criminal penalties is five years.


Exam Tips and Tricks
It is crucial to remember that there can be no prison time if a person can prove that he or she had no knowledge that the USA was being violated.



Exam Tips and Tricks
You should be very familiar with the specific powers of the Administrator and the differences between civil and 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 a 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 & II only
    2. I & IV only
    3. I, II & III only
    4. II & 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 do all of the following EXCEPT:
    1. require a witness to testify at a hearing.
    2. inspect a broker-dealer who does business in the state, even if the broker-dealer 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 supercede state laws.

Other Provisions

Related Articles
  1. Financial Advisor

    Succeeding At The Series 63 Exam

    Your career as a securities agent begins with this test. We'll show you how to score high.
  2. Financial Advisor

    Vital Considerations for a Transitioning Advisor

    Advisors who are considering breaking away from a big firm should consider these points.
  3. 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.
  4. 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.
  5. Financial Advisor

    Should You Add A Securities License To Your Qualifications?

    Clients love planners who sell securities, but a securities license takes a lot of work. Learn if the stress and study are worth it.
  6. 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.
  7. Financial Advisor

    6 Proven Tips For Series 6 Success

    These techniques can help you pass this test without the added stress.
  8. Financial Advisor

    Steps to Starting Up an Independent Broker Dealer

    Launching your own broker-dealer is a lot of work, but the potential payoff is great, both personally and financially.
  9. Taxes

    Tax Court: Your Last Resort

    Appealing an unfavorable or unfair tax ruling may be your last chance to save your finances.
  10. Financial Advisor

    Tips For Passing The Series 6 Exam

    Find out what you can do during the test to make sure you get a passing score.
Frequently Asked Questions
  1. I'm about to retire. If I pay off my mortgage with after-tax money I have saved, I can save 6.5%. Should I do this?

    Only you and your financial advisor, family, accountant, etc. can answer the "should I?" question because there are many ...
  2. My wife and I both converted our Traditional IRAs to Roth IRAs over a decade ago and have invested the maximum allowed each year since. We're buying our first home soon. Do we both qualify for one-time, tax-free, $10,000 distributions?

    You and your spouse each qualify for a penalty-free distribution of up to $10,000 for the purchase, acquisition or construction ...
  3. Is a Thrift Savings Plan (TSP) a qualified retirement plan?

    Take advantage of the government's retirement plan for employees with the Thrift Savings Plan. As with a 401(k), contributions ...
  4. Who manages the assets in a Roth 401(k) account?

    Learn how to personally manage the assets in your Roth 401(k) plan and determine the best options available to help meet ...
Trading Center