A state-registered investment adviser (IA) has been found by the State Administrator to have consistently charged unreasonable fees to its clients over the past three years. The Administrator is now considering remedial actions. Under the Uniform Securities Act (USA), which of the following actions is the Administrator LEAST likely to take?
- AIssue a cease and desist order against the IA.
- BRevoke the IA's state registration.
- COrder a criminal prosecution of the IA.
- DImpose a civil penalty (fine) on the IA.
Show answer & explanationAnswer & explanation
Correct answer: C. Order a criminal prosecution of the IA.
While the Administrator has broad powers, including issuing cease and desist orders, revoking registrations, and imposing civil penalties for violations of the USA, their authority generally extends to civil and administrative actions. Criminal prosecution for securities violations (such as charging unreasonable fees) typically falls under the jurisdiction of state attorneys general or federal prosecutors, not directly the State Administrator. The Administrator can refer cases for criminal prosecution but does not initiate it themselves.
Why the other options are wrong
- A. A cease and desist order is a common administrative remedy to stop ongoing violations.
- B. Revocation of registration is a severe but possible administrative penalty for serious and repeated violations.
- D. Imposing civil penalties (fines) is a standard administrative tool for punishing violations.
Administrator's Powers (Remedial)
State Administrators have broad remedial powers under the Uniform Securities Act (USA) to address violations, including issuing cease and desist orders, revoking or suspending registrations, and imposing civil penalties, but they do not typically initiate criminal prosecutions.
- Civil and administrative powers.
- Can suspend/revoke registrations.
- Can impose fines and issue cease and desist orders.
- Can refer cases for criminal prosecution, but do not prosecute themselves.
Memory trick: Stop, Suspend, Fine, Refer, Not Jail.