§ 5412. Denial, revocation, suspension, withdrawal, restriction, condition, or limitations
of registration
(a) If the Commissioner finds that the order is in the public interest and subsection
(d) of this section authorizes the action, an order issued under this chapter may
deny an application, or may condition or limit registration of an applicant to be
a broker-dealer, agent, investment adviser, or investment adviser representative,
and, if the applicant is a broker-dealer or investment adviser, of a partner, officer,
director, or person having a similar status or performing similar functions, or a
person directly or indirectly in control, of the broker-dealer or investment adviser.
(b) If the Commissioner finds that the order is in the public interest and subsection
(d) of this section authorizes the action, an order issued under this chapter may
revoke, suspend, condition, or limit the registration of a registrant and, if the
registrant is a broker-dealer or investment adviser, of a partner, officer, director,
or person having a similar status or performing similar functions, or a person directly
or indirectly in control, of the broker-dealer or investment adviser. However, the
Commissioner may not:
(1) institute a revocation or suspension proceeding under this subsection based on an
order issued under a law of another state that is reported to the Commissioner or
a designee of the Commissioner more than one year after the date of the order on which
it is based; or
(2) under subdivision (d)(5)(A) or (B) of this section, issue an order on the basis of
an order issued under the securities act of another state unless the other order was
based on conduct for which subsection (d) of this section would authorize the action
had the conduct occurred in this State.
(c) If the Commissioner finds that the order is in the public interest and subdivisions
(d)(1) through (6), (8), (9), (10), (12), or (13) of this section authorize the action,
an order under this chapter may censure, impose a bar on, or impose a civil penalty
on a registrant in an amount not more than $15,000.00 for each violation and recover
the costs of the investigation from the registrant, and, if the registrant is a broker-dealer
or investment adviser, a partner, officer, director, or person having a similar status
or performing similar functions, or a person directly or indirectly in control of
the broker-dealer or investment adviser. The limitations on civil penalties contained
in this subsection shall not apply to settlement agreements.
(d) A person may be disciplined under subsections (a) through (c) of this section if the
person:
(1) has filed an application for registration in this State under this chapter or the
predecessor act within the previous 10 years, which, as of the effective date of registration
or as of any date after filing in the case of an order denying effectiveness, was
incomplete in any material respect or contained a statement that, in light of the
circumstances under which it was made, was false or misleading with respect to a material
fact;
(2) willfully violated or willfully failed to comply with this chapter or the predecessor
act or a rule adopted or order issued under this chapter or the predecessor act within
the previous 10 years. As used in this subdivision, the term “willfully” means purposely
or willingly committing the act or making the omission and does not require an intent
to violate the law or to injure another or to acquire any advantage;
(3) has been convicted of a felony or within the previous 10 years has been convicted
of a misdemeanor involving a security, a commodity future or option contract, or an
aspect of a business involving securities, commodities, investments, franchises, insurance,
banking, or finance;
(4) is enjoined or restrained by a court of competent jurisdiction in an action instituted
by the Commissioner under this chapter or the predecessor act, a state, the Securities
and Exchange Commission, or the United States from engaging in or continuing an act,
practice, or course of business involving an aspect of a business involving securities,
commodities, investments, franchises, insurance, banking, or finance;
(5) is the subject of an order, issued after notice and opportunity for hearing by:
(A) the securities or other financial services regulator of a state or the Securities
and Exchange Commission or other federal agency denying, revoking, barring, or suspending
registration as a broker-dealer, agent, investment adviser, federal covered investment
adviser, or investment adviser representative;
(B) the securities regulator of a state or the Securities and Exchange Commission against
a broker-dealer, agent, investment adviser, investment adviser representative, or
federal covered investment adviser;
(C) the Securities and Exchange Commission or a self-regulatory organization suspending
or expelling the registrant from membership in the self-regulatory organization;
(D) a court adjudicating a U.S. Postal Service fraud order;
(E) the insurance regulator of a state denying, suspending, or revoking registration as
an insurance agent; or
(F) a depository institution or financial services regulator suspending or barring the
person from the depository institution or other financial services business;
(6) is the subject of an adjudication or determination, after notice and opportunity for
hearing, by the Securities and Exchange Commission, the Commodity Futures Trading
Commission, the Federal Trade Commission, a federal depository institution regulator,
or a depository institution, insurance, or other financial services regulator of a
state that the person willfully violated the Securities Act of 1933, the Securities
Exchange Act of 1934, the Investment Advisers Act of 1940, the Investment Company
Act of 1940, or the Commodity Exchange Act, the securities or commodities law of a
state, or a federal or state law under which a business involving investments, franchises,
insurance, banking, or finance is regulated;
(7) is insolvent, either because the person’s liabilities exceed the person’s assets or
because the person cannot meet the person’s obligations as they mature, but the Commissioner
may not enter an order against an applicant or registrant under this subdivision without
a finding of insolvency as to the applicant or registrant;
(8) refuses to allow or otherwise impedes the Commissioner from conducting an audit or
inspection under subsection 5411(d) of this chapter or refuses access to a registrant’s
office to conduct an audit or inspection under subsection 5411(d);
(9) has failed to supervise reasonably an agent, investment adviser representative, or
other individual, if the agent, investment adviser representative, or other individual
was subject to the person’s supervision and committed a violation of this chapter
or the predecessor act or a rule adopted or order issued under this chapter or the
predecessor act within the previous 10 years;
(10) has not paid the proper filing fee within 30 days after having been notified by the
Commissioner of a deficiency, but the Commissioner shall vacate an order under this
subdivision when the deficiency is corrected;
(11) after notice and opportunity for a hearing, has been found within the previous 10
years:
(A) by a court of competent jurisdiction to have willfully violated the laws of a foreign
jurisdiction under which the business of securities, commodities, investment, franchises,
insurance, banking, or finance is regulated;
(B) to have been the subject of an order of a securities regulator of a foreign jurisdiction
denying, revoking, or suspending the right to engage in the business of securities
as a broker-dealer, agent, investment adviser, investment adviser representative,
or similar person; or
(C) to have been suspended or expelled from membership by or participation in a securities
exchange or securities association operating under the securities laws of a foreign
jurisdiction;
(12) is the subject of a cease and desist order issued by the Securities and Exchange Commission
or issued under the securities, commodities, investment, franchise, banking, finance,
or insurance laws of a state;
(13) has engaged in dishonest or unethical practices in the securities, commodities, investment,
franchise, banking, finance, or insurance business within the previous 10 years; or
(14) is not qualified on the basis of factors such as training, experience, and knowledge
of the securities business. However, in the case of an application by an agent for
a broker-dealer that is a member of a self-regulatory organization or by an individual
for registration as an investment adviser representative, a denial order may not be
based on this subdivision if the individual has successfully completed all examinations
required by subsection (e) of this section. The Commissioner may require an applicant
for registration under section 5402 or 5404 of this chapter who has not been registered
in a state within the two years preceding the filing of an application in this State
to complete successfully an examination.
(e) A rule adopted or order issued under this chapter may require that an examination,
including an examination developed or approved by an organization of securities regulators,
be completed successfully by a class of individuals or all individuals. An order issued
under this chapter may waive, in whole or in part, an examination as to an individual,
and a rule adopted under this chapter may waive, in whole or in part, an examination
as to a class of individuals if the Commissioner determines that the examination is
not necessary or appropriate in the public interest and for the protection of investors.
(f) If the Commissioner finds it necessary to preserve the public welfare, the Commissioner
may suspend or deny an application summarily; restrict, condition, limit, or suspend
a registration; or censure, bar, or impose a civil penalty on a registrant before
final determination of an administrative proceeding. Upon the issuance of an order,
the Commissioner shall promptly notify each person subject to the order that the order
has been issued, the reasons for the action, and that, within 15 days after the receipt
of a request in a record from the person, the matter will be scheduled for a hearing.
If a hearing is not requested and none is ordered by the Commissioner within 30 days
after the date of service of the order, the order becomes final by operation of law.
If a hearing is requested or ordered, the Commissioner, after notice of and opportunity
for hearing to each person subject to the order, may modify or vacate the order or
extend the order until final determination.
(g) An order issued may not be issued under this section, except under subsection (f)
of this section, without:
(1) appropriate notice to the applicant or registrant;
(2) opportunity for hearing; and
(3) findings of fact and conclusions of law in a record in accordance with the procedures
set forth in 3 V.S.A. chapter 25 (Administrative Procedure Act).
(h) A person that controls, directly or indirectly, a person not in compliance with this
section may be disciplined by order of the Commissioner under subsections (a) through
(c) of this section to the same extent as the noncomplying person, unless the controlling
person did not know, and in the exercise of reasonable care could not have known,
of the existence of conduct that is a ground for discipline under this section.
(i) The Commissioner may not institute a proceeding under subsection (a), (b), or (c)
of this section based solely on material facts actually known by the Commissioner
unless an investigation or the proceeding is instituted within one year after the
Commissioner actually acquires knowledge of the material facts. (Added 2005, No. 11, § 1, eff. July 1, 2006; amended 2005, No. 122 (Adj. Sess.), § 13; 2017, No. 80, § 3.)