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← Series 63: Remedies & Administrative Provisions
Series 63 practice questionmediumCriminal Penalties — Scenario

For a mock NASAA exam, assume the administrator is testing this exact point. The exam wants the best state-securities answer, not a practical business answer. 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:

  1. AThe employee is automatically liable because he participated in unregistered activity
  2. BThe employee's voluntary cessation and reporting may demonstrate a lack of willfulness✓ Correct answer
  3. COnly the firm, not the employee, can be prosecuted
  4. 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. State-law analysis leads to the same conclusion despite the alternate scenario.

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