State securities administrators have jurisdiction over securities transactions that: • Originated within their state. • Are directed into their state. • Are accepted in their state. If a client draws a check on an out-of-state bank or has securities sent to another state, that does not give the securities administrator in that state jurisdiction. The offer and acceptance of a security constitutes a transaction or the sale of
a security. It is the actual conveyance of the ownership of the security for value. TESTFOCUS! Mr. Jones, a resident of Texas, receives a call from his investment representative, Bob, in New York. Bob recommends that Mr. Jones purchase 500 shares of XYZ based on his company's research and in line with Mr. Jones's investment objectives. Mr. Jones accepts the recommendation and purchases the 500 shares at the market. In this case, the securities administrators
from both Texas and New York have jurisdiction over the transaction. The state securities administrator from Texas can review the transaction because the sale was directed and accepted in Texas. Additionally, the state securities administrator from New York may review the transaction because the transaction originated from the representative's office within the state. If in the above case Mr. Jones tells his representative that he'll think about it and then calls his representative in New
York the next day from his summer home in California and purchases XYZ, the transaction would be subject to the jurisdiction of three state securities administrators: 1. The administrator from New York—because that is where the sale originated. 2. The administrator from Texas—because that is where the sale was directed. 3. The administrator from California—because that is where the sale was accepted. State securities administrators also have jurisdiction over offers of
securities that: • Originated within their state. • Are directed into their state. An offer is considered to have been made in the state in which it originated, as well as the state to which it is directed. If, in our example, Bob, the representative in New York, directs the offer of XYZ to Mr. Jones in Texas and Mr. Jones elects not to purchase the stock, the offer would be subject to the jurisdiction of the securities administrators in both New York and Texas. The state
securities administrator in New York would have jurisdiction because that is where the representative was sitting when he made the offer. The administrator in Texas would have jurisdiction because that is where the offer was directed. An offer or sale of a security that may be converted or exchanged into another security also constitutes an offer or sale of the security into which the original security may be converted. State securities administrators may: • Investigate securities-related business within their borders. • Issue subpoenas for people, books, and records from any state. • Compel witnesses to testify. • Issue cease and desist orders and seek injunctions. • Deny, suspend, or revoke registrations, licenses, and exemptions. • Adopt and amend rules. State securities administrators may investigate complaints and alleged violations both in and out of their home state. The investigation may be conducted publicly or in private. During the course of the investigation, the administrator may subpoena people, books, and records from any state and may compel witnesses to testify under oath or to give a written sworn statement. Individuals brought before the administrator may not invoke their Fifth Amendment right against self-incrimination. The administrator may force them to testify about the matter being investigated. However, a person who is forced to testify may not be prosecuted based on the testimony that he or she was compelled to offer. Thus, a witness in this situation is given partial immunity. If the administrator finds that a person has engaged in or is about to engage in any activity that would violate the USA, the administrator may issue a cease and desist order. A cease and desist order may be issued without a hearing. The administrator has the power to prevent violations before they take place. However, only a court of law has the authority to force compliance with the order and to prescribe penalties for violating the order. The state securities administrator may not: • Establish requirements for broker dealers that exceed federal requirements. • Establish requirements for investment advisers that exceed the requirements of the adviser's home state. • Require the registration of federally covered advisers. According to the Uniform Securities Act, a sale is a(n):
D)A sale is defined as every contract to sell a security or an interest in a security, including a security given as a bonus with the purchase of another security, or a gift of assessable stock when something of value is given. A sale is not an attempt to transfer ownership of a security, a solicitation of an offer to buy, or an offer of an equivalent contract (i.e., an offer or offer to sell). Under the Uniform Securities Act, which of the following constitutes an offer of a security?
A)A prospectus is the document that offers a security for sale. A tombstone advertisement always states that in and of itself, it is not an offer to sell, that such an offer may only be made by prospectus, and where a prospectus may be obtained. A prospectus is the document that offers a security for sale Under the USA, which of the following fits the definition of a sale?
C)Sales involve any contract or disposition for value; solicitations and attempts to dispose are offers.
Under the Uniform Securities Act, which of the following are defined as sales?
I III) sale is a contract or transaction for value. Therefore, when a security is given as a bonus in connection with the sale of another security, it is also considered a sale. Because an assessable stock may require a payment made by the recipient, the gift is considered a sale Under the Uniform Securities Act, Administrators of all of the following states have jurisdiction EXCEPT:
D)The state from which payment is made is not relevant in determining whether the Administrator of that state has jurisdiction. An offer to sell includes all of the following EXCEPT: A) an offer of convertible securities and warrants. B) a loan with a stated interest rate payable upon demand. C) an offer of a special stock dividend in return for additional payments. D) a purported gift of assessable stock. An Administrator does not have jurisdiction over an offer to sell that is made in a:
Which of the following involves an offer or sale?
B)The gift of an assessable security, where the recipient may be required (assessed) to put up money, involves both an offer and a sale. The gift of an assessable security, where the recipient may be required (assessed) to put up money, involves both an offer and a sale.
The Administrator in Texas has jurisdiction over an offer made:
I)The Administrator does not have jurisdiction over an offer made in a TV or radio broadcast that originated outside of the state. The same is true for a newspaper published outside the state. Under which of the following circumstances would the Administrator of this state have jurisdiction?
I II III)Radio or TV broadcasts made from outside the state do not come under the Administrator's jurisdiction. The letter sent from out of state does, because the offer is being made in this state. Note that the TV broadcast is from a station in this state so the Administrator of this state has jurisdiction Under the Uniform Securities Act, the state Administrator may by order deny, suspend or revoke an investment adviser's registration for: A) violation of another state's securities laws within the last 5 years. B) conviction for a nonsecurities-related felony more than 15 years ago. C) conviction for a securities-related misdemeanor more than 15 years ago. D) lack of experience as an investment adviser. A)A violation of any state or federal securities or commodities law within the last 10 years is grounds for denial, suspension, or revocation of registration by order. This means that no hearing is required. Convictions are grounds for administrative action only if they occurred within the past 10 years. Lack of experience is not sufficient cause for revoking or denying registration. According to the USA, under which of the following circumstances may an Administrator cancel an agent's registration?
A)Registration may be canceled by the Administrator if the registered individual has been judged mentally incompetent. Cancellation is a nonpunitive action of the Administrator. Can a state administrator issue a cease and desist order?A state securities administrator may issue a cease and desist order without a prior hearing or notice. The administrator may appoint a receiver to oversee the assets of violators and may require them to make restitution.
What can the state securities administrator do during an investigation?Investigations. A state securities administrator may investigate a broker dealer, an investment adviser, or an agent in any state if they feel that a violation has taken or may take place. The administrator may also subpoena people, books, and records in any state and may administer oaths to compel people to testify.
Which of the following could be a reason for the Administrator to deny an applicant's registration as an investment adviser representative?If the broker/dealer qualifies by virtue of training or knowledge, registration cannot be denied for lack of experience only. Registration may be denied if the applicant willfully violates the Uniform Securities Act, is financially insolvent, or has been enjoined from engaging in the securities business.
Who is the state administrator?What Is a State Administrator? A state administrator is a government or regulatory agency, or official, who oversees and enforces state-level rules and regulations regarding securities transactions.
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