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13 September 2026
Powers of the State Securities Administrator
Upon concluding an investigation that confirmed a state-registered investment adviser (IA) engaged in fraudulent misrepresentations concerning both state-registered and federal covered securities, and also operated without proper registration in a neighboring state, which of the following represents the most immediate and direct administrative action the State Securities Administrator can take unilaterally within their jurisdiction?
A.Issue a cease and desist order against the investment adviser and initiate proceedings to suspend or revoke the adviser's state registration.
B.File a complaint in state court seeking a permanent injunction and an order for the adviser to pay restitution to all affected clients.
C.Refer the case to the state Attorney General for criminal prosecution and mandate the investment adviser pay civil damages to all victims.
D.Notify the SEC of the violations and request they immediately revoke the adviser's federal registration and impose civil penalties.
Rationale:
Under the Uniform Securities Act (USA), a State Securities Administrator possesses several direct, unilateral administrative powers. Issuing a cease and desist order is a fundamental administrative tool to immediately halt ongoing violations. Furthermore, initiating proceedings to suspend or revoke a state-registered person's registration is also a direct administrative power exercised by the Administrator, especially when fraudulent conduct or operating without proper registration (even in another state, which reflects on their fitness) is confirmed. The Administrator retains anti-fraud jurisdiction over all securities activities within their state, including those involving federal covered securities, and over all state-registered persons.
Seeking a permanent injunction and ordering restitution are actions that require a court order, not unilateral administrative action by the Administrator, which is why this option is incorrect. Referring the case to the state Attorney General for criminal prosecution is a function of law enforcement and the judicial system, not a direct administrative action taken by the Administrator. Mandating civil damages also requires a court order, making this option incorrect. While the Administrator would typically notify the SEC of violations, especially those involving federal covered securities, they cannot unilaterally command the SEC to revoke a federal registration or impose federal penalties, as this falls outside the scope of the state Administrator's direct administrative authority, rendering this option incorrect.
