Series 63 practice questionhardInvestment Adviser Representatives — Administrator's Disciplinary Powers
An IAR registered in State X is charged with fraud in State Y but has not yet been convicted. The State X Administrator learns that the IAR failed to disclose this charge on her application. Which action is the Administrator permitted to take under the Uniform Securities Act?
- ATake no action until the IAR is convicted in State Y.
- BImmediately revoke the IAR's registration without a hearing, since the omission constitutes fraud.
- CSuspend the IAR's registration only after providing notice, an opportunity for a hearing, and written findings of fact.✓ Correct answer
- DIssue a cease and desist order and bar the IAR from associating with any investment adviser in the state permanently, without further proceedings.
Explanation
Why C — Suspend the IAR's registration only after providing notice, an opportunity for a hearing, and written findings of fact.
According to the USA (Section 412), the Administrator may suspend or revoke a registration for willful omission of a material fact. However, due process requires that the Administrator provide notice, an opportunity for a hearing, and written findings of fact before taking such action. Immediate revocation without a hearing (A) or permanent barring without due process (D) exceed the Administrator’s authority, and waiting for a conviction (C) is not required.
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