Summary Order

A state Administrator has concluded that Thackeray Securities should have its registration revoked for repeated rule violations. The firm has not yet been given any opportunity to respond. What must occur before a final revocation order can be entered, and what may the Administrator do in the meantime?

1. A.Notice and a hearing are required, but the Administrator may not take any action at all against the firm until a final order is enteredThis would leave investors unprotected during the process, which is precisely why the summary suspension power exists.
2. B.A criminal conviction must first be obtained, since revocation is the most severe sanction available under the ActAdministrative sanctions are entirely separate from criminal proceedings. An Administrator can revoke a registration without any criminal case being brought.
3. C.Prior notice, an opportunity for a hearing, and written findings of fact and conclusions of law - though the Administrator may summarily suspend the registration pending final determinationCorrect. Full process is required for a final revocation; a summary suspension is the interim tool available in the meantime.
4. D.Nothing further - an Administrator may revoke a registration immediately upon finding repeated violations, subject only to later judicial reviewImmediate action is available only as a summary suspension or postponement. A final revocation requires notice, hearing opportunity and written findings.

Why: A final order denying, suspending or revoking a registration may be entered only after the affected person receives appropriate prior notice, is given an opportunity for a hearing, and the Administrator issues written findings of fact and conclusions of law. Because those steps take time, the Act allows the Administrator to enter a SUMMARY order postponing or suspending the registration pending final determination - but even then, notice must be given promptly and a hearing must be held if requested in writing.

An issuer sells its securities in a transaction it believes qualifies as an exempt transaction. The Administrator issues an order summarily denying the exemption. In the proceeding that follows:

1. A.The Administrator bears the burden of proving that no exemption was available, and must prove it before the order takes effectThis reverses the burden and misstates timing. The claimant proves the exemption, and a summary order can take effect before the hearing occurs.
2. B.The issuer has no right to a hearing because a summary order is final when enteredA summary order is effective immediately but not final in the sense of unreviewable. A written request entitles the issuer to a hearing.
3. C.The issuer bears the burden of proving the exemption, and it is entitled to a hearing if it requests one in writingCorrect. The person claiming an exemption must prove it, and a written request triggers a prompt hearing, generally scheduled within 15 days.
4. D.The issuer may appeal directly to a court without first requesting a hearing, since exemptions are questions of lawThe Act contemplates the administrative hearing first. Judicial review follows the final order that comes out of that hearing.

Why: Two rules combine. First, the burden of proving an exemption or an exception from a definition rests on the person claiming it, not on the Administrator. Second, when the Administrator summarily denies or revokes an exemption, the affected person is entitled to a hearing upon written request, and the hearing is scheduled promptly, generally within 15 days of the request. The summary order stays in effect in the meantime.