The entity responsible for interpreting and enforcing the rules and regulations in the Uniform Securities Act (USA) is the state administrator. If you’re familiar with the Securities and Exchange Commission (SEC), you can think of the state administrator as each state’s counterpart to the SEC.
As discussed in the introduction of this material, the state administrator is an office focused on protecting investors and supporting the integrity of the securities markets. For example, the Department of Financial Protection and Innovation is California’s state administrator. If you want to find the administrator in your state, search: “State securities administrator of [state]”.
The Series 63 exam covers a wide range of USA rules and regulations, and the state administrator enforces them. These regulations include:
Let’s break down each of these a bit further.
Registration & regulation of persons
You’ve already learned about the four “players in the game,” or types of persons the state administrator focuses on:
Those legal definitions matter because registration requirements depend on them. If a business or a natural person (a human being) meets one of these definitions, they’re legally required to register with the state administrator. Registration brings them under a form of government oversight, since the administrator is part of each state’s government.
Later in this material, we’ll cover the registration process and what registration involves.
Registration & regulation of securities
Registration and regulation don’t apply only to people and firms - they can also apply to securities. In particular, issuers are often subject to rules enforced by the state administrator. In many cases, issuers must publicly disclose significant information about the securities they offer to investors. The goal is transparency, so investors have the information they need to make informed decisions.
Enforcement of general securities laws
The USA is broad legislation that covers many parts of the securities markets and their participants. Because there’s a lot to interpret and apply, each state relies on the state administrator to enforce the rules and regulations that apply in that state.
Enforcement of anti-fraud provisions
Preventing fraud is central to many USA rules, but it’s important enough to call out separately. A primary job of the state administrator is enforcing the USA’s anti-fraud provisions. Without that enforcement, confidence in the securities markets could drop, which can reduce investment in businesses (and even governments) and harm the broader economy. If fraud were common, would investors be willing to put their money at risk?
As you work through the rest of this material, remember that the rules, regulations, and laws discussed are generally enforced by the state administrator. How involved the administrator is depends on the situation.
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