Administrator

When an agent's employment is terminated, notice to the Administrator must be given by:

1. A.Only the customerThe customer holds no registration and files nothing with the state, and is often the last to learn of a departure. The notice duty falls on the parties whose registrations the termination actually changes.
2. B.The agent and the broker-dealerCorrect - both parties notify.
3. C.The SEC onlyThis routes a state filing to the federal regulator. Agent registration is administered by the state, so the notice belongs with the Administrator of the state where the agent is registered.
4. D.No oneThis treats the departure as a private employment matter. An agent's registration is tied to the employing broker-dealer, so without notice the state's records would keep showing the agent active at a firm they no longer work for.

Why: Both the agent and the broker-dealer must notify the Administrator of a termination.

Making a false or misleading statement to the Administrator is:

1. A.Allowed if unintentionalThe obligation is to verify accuracy before submitting. A registrant who files without checking has not met that duty, and the Administrator is left relying on wrong information regardless of what the filer meant to convey.
2. B.A minor clerical errorSome errors truly are clerical, which is the hook here. The stem describes a statement that is false or misleading, and labeling it minor does not change what the Administrator relied on in acting on the filing.
3. C.UnlawfulCorrect - false statements to regulators are barred.
4. D.Required in filingsFilings do require statements, but complete and accurate ones. This answer takes the requirement and substitutes its violation, turning the duty to inform the Administrator into permission to mislead it.

Why: Providing false or misleading statements to the Administrator is unlawful.

The Administrator's power to make rules and forms:

1. A.Overrides federal lawThis inverts the hierarchy. State rules operate within the space federal law leaves open, and where Congress has preempted, no state rulemaking can take the ground back.
2. B.Is exercised secretlyA rule nobody can read cannot be obeyed. Publication is what lets registrants learn the standards they will be judged against, so secrecy would defeat the purpose of having rules at all.
3. C.Does not existThis denies the authority outright. The Act would be unworkable without the power to prescribe the forms, procedures, and orders through which it is actually administered.
4. D.Exists to administer the Act, and the rules must be publishedCorrect - rulemaking with publication.

Why: The Administrator may issue rules, forms, and orders to administer the Act, and these must be published.

During an examination of Larkspur Asset Management, the Administrator reviews how the firm has handled the securities sitting in its clients' accounts. An adviser must NOT:

1. A.Send account statementsSending statements is an affirmative safeguard, and it becomes especially important where the adviser has custody. The question asks what is forbidden, and keeping clients informed about their own accounts is the opposite of that.
2. B.Make unauthorized use of client securitiesCorrect - no unauthorized use of client assets.
3. C.Disclose its feesFee disclosure is required rather than prohibited, since the client cannot assess the value of the relationship without knowing its cost. Nothing about telling a client what they pay is off limits.
4. D.Supervise employeesSupervision is an obligation the firm owes, not a practice it must avoid. Failure to supervise is itself a basis for discipline, so this choice describes a duty rather than a prohibition.

Why: An adviser may not make unauthorized use of client securities, such as lending them out without consent.