An investor believes she was defrauded by an investment adviser representative and wants to recover monetary damages for her losses. Which statement correctly distinguishes the roles of the Administrator and the courts in this situation?
- AOnly a court has authority to award damages or order rescission to the investor; the Administrator may impose administrative sanctions but cannot compensate her directly
- BThe Administrator may award the investor money damages directly through an administrative order
- CThe Administrator and the courts share concurrent authority to award identical monetary remedies to injured investors
- DThe investor must first obtain a cease-and-desist order from the Administrator before any court will hear her case
Show answer & explanationAnswer & explanation
Correct answer: A. Only a court has authority to award damages or order rescission to the investor; the Administrator may impose administrative sanctions but cannot compensate her directly
The Administrator's remedies are administrative in nature — such as revocation, suspension, fines payable to the state, and cease-and-desist orders — and do not include directly compensating a private investor. Only a court, through a private civil action, can award damages or order rescission to the injured party.
Why the other options are wrong
- B. Incorrect; administrative orders do not provide direct monetary compensation to private investors.
- C. Incorrect; the Administrator's remedies and court remedies are distinct, not identical or concurrent in this way.
- D. Incorrect; a private civil suit does not require a prior administrative cease-and-desist order.
Administrator vs. Court Remedies
The Administrator enforces the USA through administrative sanctions (fines to the state, license actions, cease-and-desist orders), while only courts can award damages or rescission directly to injured investors.
- Administrator's fines go to the state treasury, not the investor.
- Investor compensation requires a private civil lawsuit in court.
- Administrative and judicial remedies serve different purposes and are pursued separately.
Memory trick: 'Administrator polices the industry; the courtroom pays the investor.'