NASAA Series 66 Uniform Combined State Law ExaminationLaws, Regulations, and Guidelines, including Prohibition on Unethical Business PracticesMedium
The Administrator of State Y suspects that a registered investment adviser (IA) is engaging in undisclosed conflicts of interest and misleading advertising. To investigate, the Administrator issues a subpoena for the IA's advertising materials, client contracts, and email communications. The IA refuses to comply, citing privacy concerns. What is the Administrator's authority in this situation?
- AThe Administrator must first obtain a court order before issuing a subpoena for sensitive client information.
- BThe Administrator can only investigate if there is a formal client complaint, not based on suspicion.
- CThe Administrator has the power to compel the production of documents through subpoena, and non-compliance can lead to penalties.
- DThe Administrator can only request documents voluntarily; a subpoena is not enforceable without a court order.
Show answer & explanationAnswer & explanation
Correct answer: C. The Administrator has the power to compel the production of documents through subpoena, and non-compliance can lead to penalties.
State Administrators have broad investigative powers under the Uniform Securities Act, including the authority to issue subpoenas to compel the production of documents and testimony. Refusal to comply with a legitimate subpoena can result in disciplinary action.
Why the other options are wrong
- A. The Administrator generally has the power to issue subpoenas directly without a prior court order for investigative purposes.
- B. Administrators can initiate investigations based on suspicion, public interest, or other information, not just formal complaints.
- D. Administrators have legal authority beyond voluntary requests, including the power to subpoena.
Administrator's Investigative Powers (Subpoena)
State Administrators have the authority to issue subpoenas to compel the production of documents and testimony during an investigation into potential violations of the Uniform Securities Act.
- Subpoena power is granted by USA.
- Compels documents and testimony.
- Non-compliance can lead to penalties.
Memory trick: The Administrator acts as judge, detective, and record-keeper.