Series 63 practice questionhardAdministrative Procedures — Federal Law Preemption
During a registration workshop, the instructor adds this setup first. The key is the registration, exemption, or ethical rule doing the real work. A state Administrator adopts a rule that directly conflicts with a provision of the Securities Act of 1933. Which of the following is TRUE?
- AThe state rule prevails because state securities laws always supersede federal laws
- BThe Administrator's rule is invalid because state rules may not conflict with applicable federal law✓ Correct answer
- CBoth rules apply simultaneously and registrants must comply with both
- DThe conflicting rule is valid until challenged in federal court
Explanation
Why B — The Administrator's rule is invalid because state rules may not conflict with applicable federal law
Under USA Section 415, the Administrator may make rules and orders necessary to carry out the provisions of the act, but these rules cannot conflict with applicable federal securities law. Federal preemption under the Supremacy Clause means that conflicting state rules are invalid. The governing USA principle is unchanged even though the framing is different.
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