Remedies and Administrative Provisions practice questions

Answer: A) Tender the shares back to the person who sold them

A buyer who still holds the security recovers the price paid plus interest, costs and attorneys' fees, minus income received, by tendering the security to the seller. A buyer who has already disposed of it sues for damages instead.

• ACorrect. Rescission-type recovery is conditioned on tender of the security. The buyer gets back the price paid plus interest, costs and reasonable attorneys' fees, minus any income received.
• BIncorrect. A buyer who no longer owns the security may sue for damages, but there is no requirement to sell first. A buyer who still owns the shares recovers by tendering them.
• CIncorrect. The private civil remedy runs between the buyer and the seller. The security is tendered to the seller, not to the Administrator.
• DIncorrect. Selling an unregistered, non-exempt security creates civil liability by itself. No fraud finding or prior administrative action is needed.

Answer: A) Willfully violating a provision of the Act, such as knowingly selling an unregistered nonexempt security

Criminal penalties under the Uniform Securities Act require a willful violation, meaning the person knew what they were doing. Under the 1956 Act the maximum is a $5,000 fine, 3 years in prison, or both.

• ACorrect. The Act's criminal penalties apply to a person who willfully violates the Act. Here 'willfully' means the person knew what they were doing. Under the 1956 Act a conviction can bring a fine of up to $5,000, up to 3 years in prison, or both.
• BIncorrect. Criminal liability under the Act is not strict liability. The violation must be willful. Unintentional violations may still lead to administrative or civil remedies.
• CIncorrect. A customer loss is not an element of the criminal offense. What matters is whether the violation was willful.
• DIncorrect. Criminal prosecution does not depend on a prior civil judgment. Civil liability and criminal liability are separate remedies under the Act.

Answer: D) Imprisoned for it

• AIncorrect. Civil suits may still proceed.
• BIncorrect. Fines may still apply.
• CIncorrect. Investigation is still allowed.
• DCorrect. They may still be fined.

Answer: A) The broker-dealer's agent who solicited the client and processed the order

Persons who control the seller, its partners, officers and directors, and employees, broker-dealers or agents who materially aid the unlawful sale are jointly and severally liable with the seller. The exception is someone who proves they did not know and could not reasonably have known the facts.

• ACorrect. An agent who materially aids an unlawful sale is jointly and severally liable with the seller to the same extent. The agent escapes liability only by proving they did not know, and with reasonable care could not have known, the facts behind the liability.
• BIncorrect. Liability extends to persons who control the seller or who materially aid the violation. Simply working at the same firm, with no role in the sale, does not create liability.
• CIncorrect. The adviser did not control the seller or materially aid the sale, so the adviser is not liable for it.
• DIncorrect. A fellow buyer is not a seller and did not aid this sale. That buyer may have their own rescission claim rather than any liability.

Answer: A) Consent order

• ACorrect. The registrant agrees to the terms.
• BIncorrect. That needs a court.
• CIncorrect. That needs a court.
• DIncorrect. That's for securities.

Answer: C) Yes, to cooperate in enforcement

• AIncorrect. It isn't required.
• BIncorrect. Sharing is allowed.
• CCorrect. Cooperation is allowed.
• DIncorrect. It isn't required.

Answer: B) Generally can't later sue to recover

• AIncorrect. The rescission offer limits it.
• BCorrect. A proper rescission offer bars suit.
• CIncorrect. That isn't how it works.
• DIncorrect. There's no penalty.

Answer: D) Stop order

• AIncorrect. That compels testimony.
• BIncorrect. That is a trading order.
• CIncorrect. That is an ad.
• DCorrect. It can deny, suspend or revoke a registration.

Answer: C) Is entitled to notice and a hearing

• AIncorrect. There's no such rule.
• BIncorrect. It has those rights.
• CCorrect. Due process applies.
• DIncorrect. That isn't how stop orders work.

Answer: B) 30 days

• AIncorrect. The period is 30 days.
• BCorrect. A rescission offer not accepted within 30 days bars suit.
• CIncorrect. The period is 30 days.
• DIncorrect. The period is 30 days.