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 principal transactions with clients. The Administrator issues a subpoena demanding the IA's client account statements, trade blotters, and internal communications related to these transactions. Which of the Administrator's powers is being exercised?
- APower to revoke or suspend registration.
- BPower to issue a cease and desist order.
- CPower to conduct investigations and subpoena witnesses/documents.
- DPower to assess civil penalties.
Show answer & explanationAnswer & explanation
Correct answer: C. Power to conduct investigations and subpoena witnesses/documents.
State Administrators have broad investigative powers, including the authority to conduct examinations, subpoena witnesses, compel the production of documents, and administer oaths. This power is crucial for discovering violations of the Uniform Securities Act.
Why the other options are wrong
- A. Revoking or suspending registration is a disciplinary action taken *after* an investigation and finding of violation.
- B. A cease and desist order is a remedial action taken *after* a violation is found, not an investigative tool.
- D. Assessing civil penalties is a remedial action taken *after* a violation is found, not an investigative tool.
Administrator's Investigative Powers (USA)
Under the Uniform Securities Act (USA), the State Administrator has broad powers to conduct investigations to determine if violations have occurred. These powers include the ability to subpoena witnesses, compel the production of books and records, administer oaths, and take evidence, even if the investigation extends beyond state borders.
- Administrator can investigate any time, without prior cause.
- Includes subpoena power for documents and witnesses.
- Can administer oaths and take evidence.
- Essential for enforcing the USA and protecting investors.
Memory trick: Rule, Investigate, Enforce, Protect.