Series 63 practice questionmediumAdministrator's authority over fraud in federal covered securities
An agent in State A sells shares of a federal covered mutual fund using materially misleading statements. What is the Administrator's MOST LIKELY course of action?
- ABring anti-fraud enforcement against the agent✓ Correct answer
- BRequire registration of the mutual fund shares
- CForce the SEC to investigate the issuer
- DBan all sales of the mutual fund in State A
Explanation
Why A — Bring anti-fraud enforcement against the agent
States retain anti-fraud enforcement powers over all securities, including federal covered securities (USA Sec 402(b)). Registration or banning fund sales is not permitted except in cases of fraud, and the Administrator cannot order the SEC to investigate.
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