Series 63 practice questionmediumCriminal Penalties — Scenario
A broker-dealer employee discovers that his firm is operating without proper state registration. He immediately reports this to his supervisor and ceases selling activities. If the state pursues criminal prosecution:
- AThe employee is automatically liable because he participated in unregistered activity
- BThe employee's voluntary cessation and reporting may demonstrate a lack of willfulness✓ Correct answer
- COnly the firm, not the employee, can be prosecuted
- DThe employee is liable regardless because ignorance is not a defense
Explanation
Why B — The employee's voluntary cessation and reporting may demonstrate a lack of willfulness
Under USA Section 409, criminal liability requires willful violation. An employee who promptly ceased activity and self-reported upon discovering the violation demonstrates a lack of willful intent. While this does not guarantee immunity, it strongly suggests the conduct was not willful.
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