Criminal Liability

Thaddea Poyntz, an agent, sold unregistered nonexempt securities because she genuinely and carelessly misread her firm's product list. There is no evidence she intended to do anything improper. Regarding the consequences of that sale under the Uniform Securities Act, which statement is accurate?

1. A.Both criminal and civil liability require proof that she acted willfully.Only the criminal track requires willfulness. Civil liability for a registration violation does not.
2. B.Neither criminal nor civil liability requires proof that she acted willfully.Criminal conviction under the Act does require a willful violation.
3. C.Civil liability requires willfulness, but criminal liability does not.This reverses the rule.
4. D.Criminal liability requires a willful violation, but the buyer's civil remedy does not.Correct. Willfulness gates the criminal track only; the buyer's statutory remedy for an unregistered sale is available regardless of intent.

Why: Willfulness is an element of CRIMINAL liability under the Act: a person may be fined and imprisoned only on conviction of a WILLFUL violation, and even then "willful" means she intended to do the act, not that she intended to break the law. Civil liability carries no such element. A buyer who was sold an unregistered nonexempt security has the statutory remedy regardless of the seller's state of mind. So Poyntz's honest carelessness is a real obstacle to a criminal case and no obstacle at all to the customer's civil claim.

Charged criminally with willfully selling unregistered nonexempt securities, an agent testifies credibly that he sincerely believed the securities were properly registered and never intended to cheat anyone. Under the Uniform Securities Act, this testimony:

1. A.Does not defeat willfulness, because he intended to sell the securities even if he misunderstood their statusCorrect. Intentionally doing the act — selling — satisfies willfulness; mistake about registration status or absence of fraudulent intent is no defense.
2. B.Defeats the charge, because criminal liability requires specific intent to defraudThis imports a fraud element that registration crimes do not carry. Willfulness is about doing the act deliberately, not about evil motive.
3. C.Guarantees acquittal under the no-knowledge provisionThe no-knowledge provision concerns ignorance of the specific rule or order violated and only precludes IMPRISONMENT — it is not an acquittal and does not cover mistaken beliefs about a security's registration.
4. D.Converts the offense from criminal to civilNo mechanism converts charges; criminal and civil liability are independent tracks that can proceed on the same facts.

Why: Willfulness under the Act requires only that the defendant intentionally committed the act constituting the violation; neither intent to defraud nor knowledge that the conduct was unlawful is required. Separately, proof of no knowledge of the specific RULE or ORDER violated blocks imprisonment (though not a fine) — but ignorance that the securities were unregistered is not that defense. Review: Criminal liability.