Tuesday, April 13, 2010

Administrative enforcement actions

The powers of the securities Administrator tend to generate a few questions on both the Series 65 and 66. Since most candidates struggle with anything connected to the Uniform Securities Act, let's make sure you understand the fundamentals. How would you answer a practice question like the following?

Which of the following Administrative orders is most severe?
A. cease & desist
B. suspension
C. cancellation
D. revocation

EXPLANATION: a good test question writer knows how to mess with the people who dared to come to the exam center without sufficient preparation--let's give these people three choices that sound pretty darned severe. Cease & desist sounds pretty harsh, but it's also an order that can be issued before a hearing has been granted and held and is often just a formal warning from the Administrator to cut it out. A cancellation is definitely final, but it's issued when a registrant dies, leaves the state, goes out of business, or is declared mentally incompetent. Nobody violated the Act necessarily--a cancellation is a "non-punitive order," meaning it does not provide a form of punishment. The "Administrator" in my state is also in charge of driver's licenses. If you're an inveterate lead-foot, you may already sense that a "revocation" is more serious than a "suspension" of your license, right? That's why the answer is the order of "revocation." An order of revocation from the Administrator is like a "bar" order from FINRA. Game over. Find a new career. We've seen what you have to offer, and you won't be offering any securities or investment advice anymore.



  1. Hello. It's been a long time. I hope all is well.
    I'm currently working at an insurance company, so I've been pretty busy.
    I just have a question.
    How can I define/describe mutual funds to a "normal" person?
    I know the financial definition of it, but I can't seem to reword it properly.
    I'd really appreciate your help.

  2. Hi, Daniel
    See the next post for an answer--your question deserves to be handled out in the open. Not sure everyone follows the comments to blog posts.