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← Series 63: Regulation of Investment Advisers
Series 63 practice questionhardAdministrative Action—Cease and Desist

An unregistered individual in State X receives compensation for providing a written asset allocation plan (with specific mutual fund recommendations) to five clients. When the Administrator becomes aware, the MOST LIKELY action is:

  1. AIssue a cease and desist order and seek civil penalties for unregistered investment adviser activity.✓ Correct answer
  2. BRequest that the individual register as an agent.
  3. CFile criminal charges for securities fraud.
  4. DTake no action since only five clients are involved.
Explanation

Why A — Issue a cease and desist order and seek civil penalties for unregistered investment adviser activity.

Providing specific recommendations for compensation fits the adviser definition (USA §401(c)). The Administrator would issue a cease and desist order for unregistered activity. Registration as an agent (B) is irrelevant; C is excessive unless fraud is present; D is incorrect—number of clients is not an exemption.

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