NASAA Series 66 Uniform Combined State Law ExaminationLaws, Regulations, and Guidelines, including Prohibition on Unethical Business PracticesHard
The Administrator of State Z has issued a cease and desist order against an unregistered individual who was found to be acting as an investment adviser in the state. The individual immediately complies with the order. What is the Administrator's next likely action or power regarding this individual?
- AThe Administrator is limited to the cease and desist order since the individual complied.
- BThe Administrator can impose civil penalties, such as fines, and require restitution to clients.
- CThe Administrator can revoke the individual's future ability to register as an investment adviser in State Z.
- DThe Administrator must immediately refer the case to federal authorities for criminal prosecution.
Show answer & explanationAnswer & explanation
Correct answer: B. The Administrator can impose civil penalties, such as fines, and require restitution to clients.
Even if an individual complies with a cease and desist order, the Administrator retains the power to impose additional remedies, including civil penalties (fines) and requiring restitution to affected clients, to address past violations and deter future misconduct.
Why the other options are wrong
- A. Compliance with a cease and desist order stops the ongoing illegal activity but does not absolve the individual of penalties for past violations.
- C. Revoking future ability to register is a possible outcome but is often part of a broader disciplinary action that includes fines and restitution, making C a more comprehensive and immediate 'likely action' for past violations.
- D. While criminal prosecution is possible, it's not an 'immediate must' and is typically handled by legal departments, not the Administrator directly, and is separate from civil remedies.
Administrator's Remedial Powers
State Administrators have broad powers to enforce the Uniform Securities Act, including issuing cease and desist orders, imposing civil penalties (fines), requiring restitution, and revoking or suspending registrations.
- Can issue cease and desist orders to stop illegal activity.
- Can impose civil fines for violations.
- Can order restitution to compensate defrauded clients.
- Can deny, suspend, or revoke registrations.
Memory trick: The Administrator isn't just a traffic cop; they can fine, make you pay back, and take away your license.