16.1 Uniform Securities Act

The Uniform Securities Act (USA) serves as model legislation for state securities regulation. Developed by the Uniform Law Commission with input from NASAA, most states have adopted some version of this act to govern securities activities within their borders.

Purpose and Framework

The USA provides a comprehensive framework for:

Securities Registration: Methods for registering securities for sale

Person Registration: Registration of broker-dealers, agents, IAs, and IARs

Antifraud Provisions: Prohibitions against fraud and manipulation

Administrative Enforcement: Powers granted to state administrators

Three-Part Registration System

The USA requires registration in three categories:

1. Securities

General Rule: Securities must be registered unless exempt

Registration Methods: Coordination, Qualification, Notice Filing

Duration: Generally 1 year from effective date

Renewal: Annual renewal required

2. Persons

Broker-Dealers: Must register in each state where doing business

Agents: Must register with states where they operate

Investment Advisers: SEC or state registration required

IARs: Must register at state level

3. Transactions

Exempt Transactions: Some transactions exempt from registration

Antifraud Applies: Exemption does NOT protect from fraud laws

Transaction-Specific: Exemption applies to that transaction only

State Administrator Powers

The state securities administrator has broad authority to enforce the USA within their jurisdiction.

Rulemaking Authority

Adopt Rules: Consistent with the Act

Issue Interpretive Opinions: Guidance on Act provisions

Set Requirements: Registration standards and procedures

Grant Exemptions: May create additional exemptions

Investigative Authority

Subpoena Power: Compel production of documents and witnesses

Examine Records: Inspect books and records

Administer Oaths: Take sworn testimony

Cross-Border Authority: May investigate in any state

Fifth Amendment: Cannot compel self-incriminating testimony

Enforcement Authority

Deny Registration: Refuse initial registration

Suspend Registration: Temporarily halt registration

Revoke Registration: Permanently remove registration

Issue Stop Orders: Halt securities offerings

Cease and Desist Orders: Can issue without prior hearing

Civil Penalties: Impose fines

Criminal Referral: Refer matters to attorney general

On the Exam: The administrator can issue cease and desist orders without prior notice or hearing. However, a hearing must be provided upon request (typically within 15 days).

Delegation of Powers

Can Delegate: Serving subpoenas; Administrative functions; Conducting investigations

Cannot Delegate: Granting registration exemptions; Issuing cease and desist orders; Final enforcement decisions

Registration Effective Dates

General Rule

Standard: Effective at noon on the 30th day after filing

Early Effectiveness: Administrator may grant earlier date

Stop Order: Administrator may delay or deny

Federal Covered Securities

No State Registration: Exempt from full registration

Notice Filing: State may require notice and fee

Antifraud: Still subject to state antifraud laws

Consent to Service of Process

All registrants must file a consent to service of process:

Irrevocable Consent: Designates administrator as agent for service

Legal Actions: Allows lawsuits to be filed in state

Out-of-State Parties: Provides jurisdiction over non-residents

Key Takeaways

1. The USA is model legislation - each state may modify it

2. Three-part system: securities, persons, and transactions

3. Administrator has broad powers: rulemaking, investigation, enforcement

4. Can issue cease and desist without prior hearing

5. Cannot compel self-incriminating testimony (5th Amendment)

6. Standard registration: effective at noon on day 30 after filing