Authority of State Securities Administrator

Lesson

In this section, we will discuss the authority of state securities administrators, their role in regulating securities, and the remedies and administrative provisions they can enforce. State securities administrators have the power to investigate potential violations, issue cease and desist orders, and impose fines and penalties. They also have the authority to revoke or suspend the registration of securities professionals who engage in unethical business practices.

Practice Question #1

Which of the following actions can a state securities administrator take in response to a violation of securities laws?

A) Issue a cease and desist order

B) Impose a fine

C) Revoke a securities professional's registration

D) All of the above

Select an option above to see an explanation here.

A) A state securities administrator can issue a cease and desist order to stop a person or entity from engaging in a specific activity. B) A state securities administrator can impose a fine as a monetary penalty for violating securities laws. C) A state securities administrator can revoke a securities professional's registration, effectively prohibiting them from conducting business in the state. D) A state securities administrator can take all of the above actions in response to a violation of securities laws.

Terms

State Securities Administrator:: A government official responsible for enforcing state securities laws and regulations.

Practice Question #2

What is the primary responsibility of a state securities administrator?

A) Enforcing federal securities laws

B) Regulating self-regulatory organizations

C) Enforcing state securities laws and regulations

D) Resolving disputes between investors and securities professionals

Select an option above to see an explanation here.

A) Enforcing federal securities laws is the responsibility of the Securities and Exchange Commission (SEC), not state securities administrators. B) Regulating self-regulatory organizations is also the responsibility of the SEC, not state securities administrators. C) The primary responsibility of a state securities administrator is to enforce state securities laws and regulations. D) Resolving disputes between investors and securities professionals is typically handled through arbitration or mediation, not by state securities administrators.

Do Not Confuse With

Self-Regulatory Organizations (SROs):: Non-governmental organizations, such as FINRA, that regulate the securities industry and enforce rules and standards for their members.

Practice Question #3

Which of the following is NOT considered an unethical business practice in the securities industry?

A) Providing false or misleading information to investors

B) Engaging in insider trading

C) Recommending suitable investments to clients

D) Manipulating the market to artificially inflate stock prices

Select an option above to see an explanation here.

A) Providing false or misleading information to investors is considered an unethical business practice. B) Engaging in insider trading is considered an unethical business practice. C) Recommending suitable investments to clients is a fundamental responsibility of securities professionals and is not considered unethical. D) Manipulating the market to inflate stock prices artificially is considered unethical.

Historical Example

In the early 2000s, a major financial firm was found to have engaged in unethical business practices by providing biased research to investors. State securities administrators and federal regulators investigated the firm and ultimately imposed significant fines and penalties. The firm was also required to implement reforms to prevent future misconduct.