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Series 63 practice questionhardSecurities Registration — Stop Orders

On a timed state-securities quiz, the scenario below appears. Assume all filings and notices are evaluated under the USA. A state Administrator issues a stop order against an issuer's registration statement after discovering that the prospectus contains material misstatements. Which of the following is TRUE regarding the stop order?

  1. AThe stop order is permanent and cannot be vacated
  2. BThe issuer may continue selling until a court affirms the stop order
  3. CThe stop order automatically applies in all other states
  4. DThe Administrator may vacate the stop order if conditions that prompted it are corrected✓ Correct answer
Explanation

Why D — The Administrator may vacate the stop order if conditions that prompted it are corrected

Under USA Section 306, a stop order is not necessarily permanent. The Administrator may modify or vacate a stop order if the conditions that prompted its issuance are corrected and it is consistent with the public interest. The burden falls on the registrant to demonstrate that the deficiencies have been remedied. This version tests the same concept with a different fact pattern wrapper.

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