Series 63 Administrative Provisions and Enforcement Practice Questions

Correct answer: D. The client fails to accept the written offer within 30 days of receiving it

A compliant written rescission offer must state the consideration to be paid (or other relief) and give the offeree a reasonable period — 30 days — to accept. If the client fails to accept within that 30-day window, the right to sue for that violation is extinguished, provided the offer otherwise met the statutory requirements and no suit was already pending.

• A. Receiving ordinary dividend payments doesn't equate to accepting or rejecting the rescission offer, so it doesn't extinguish the client's right to sue.
• B. There's no requirement that the client affirmatively file a written rejection within 10 days — the operative event is failing to accept within the offer's stated period.
• C. What matters is the client's failure to accept within the offer's stated period, not when the broker-dealer sent the offer relative to the sale.
• D. Correct. If the client fails to accept a compliant written rescission offer within the specified period (30 days), the right to sue for the underlying violation is extinguished.

Correct answer: C. The applicant completed a two-year college program rather than a four-year degree

The Act enumerates specific grounds for denial — felony or relevant misdemeanor convictions within the statutory look-back period, injunctions, insolvency, failure to supervise, dishonest or unethical practices, and material misstatements in the application, among others. Educational attainment or degree type is not among these enumerated grounds and cannot by itself support denial.

• A. A securities-related felony conviction within the statutory lookback period is an explicit statutory ground for denial.
• B. Being currently enjoined from engaging in the securities business is an explicit statutory ground for denial.
• C. Correct. Educational attainment (a two-year versus four-year degree) is not a statutory ground on which the Administrator can deny an application.
• D. A materially false statement in the application is an explicit statutory ground for denial.

Correct answer: A. Tendering the security back in exchange for the consideration originally paid, plus interest at the legal rate, less any income received on the security

The USA's civil liability remedy for a purchaser who still holds the security is rescission: the purchaser tenders the security back to the seller in exchange for the consideration paid, plus interest at the legal rate from the date of payment, minus any income (e.g., dividends) received on the security during the holding period. If the purchaser no longer owns the security, the remedy shifts to damages measured similarly.

• A. Correct. Where the purchaser still holds the security, the civil liability remedy is rescission: tendering the security back for the amount originally paid plus interest at the legal rate, less any income received on it.
• B. The Act's civil liability provisions are compensatory/rescissory in nature, not punitive; there's no treble-damages remedy built into Section 410.
• C. There is no fixed statutory penalty option here; the remedy is calculated based on actual consideration paid and interest, not a flat $10,000 figure.
• D. The Act doesn't impose an indefinite constructive trust remedy; the purchaser's remedy while still holding the security is tender-and-refund, not compelled indefinite trusteeship.

Correct answer: D. Issue a cease-and-desist order without first having to obtain a court injunction

The Administrator has independent authority to issue a cease-and-desist order to stop threatened or ongoing violations without first needing to obtain a court injunction (though injunctive relief may also be separately available through the courts).

• A. Incorrect — the Administrator has its own direct administrative enforcement authority and need not route the matter through the attorney general.
• B. Incorrect — no SEC concurrence is required for state administrative action.
• C. Incorrect — the Administrator can act on a reasonable belief that a violation is about to occur, not only after the fact.
• D. Correct.