Logan Murphy is a state-registered Investment Adviser Representative (IAR) operating solely out of State A. He sends an email communication about a specific investment opportunity to one of his long-standing clients, Ms. Chen. At the time Logan sent the email, and at the time Ms. Chen received it, Ms. Chen was a resident of State A. A week later, Ms. Chen permanently relocates to State B. After settling in State B, Ms. Chen calls Logan in State A and verbally accepts the investment offer. Logan processes the transaction. Several months later, Ms. Chen, now a resident of State B, files a complaint with the State A Administrator, alleging Logan made a material misrepresentation about the investment. The investment itself is a security issued by a company listed on the NYSE.
Which of the following actions is the State A Administrator most likely authorized to take under the Uniform Securities Act regarding Logan Murphy?
A.The State A Administrator has jurisdiction to investigate Logan's conduct and potentially initiate proceedings to suspend or revoke Logan's State A registration, as the offer originated and was received in State A.
B.The State A Administrator lacks jurisdiction over this matter because the investment is a federally covered security, placing it solely under SEC oversight.
C.The State A Administrator may only refer the complaint to the State B Administrator, as Ms. Chen was a resident of State B when she accepted the offer and filed the complaint.
D.The State A Administrator can immediately issue a final order for Logan to pay Ms. Chen full rescission, bypassing the need for an administrative hearing.
Rationale:
The Uniform Securities Act (USA) grants jurisdiction to a state Administrator if an offer to sell or buy originates in the Administrator's state, is directed to the Administrator's state, or is accepted in the Administrator's state. In this scenario, the offer originated in State A (Logan's location) and was directed to and received in State A (Ms. Chen's location at the time). This establishes clear jurisdiction for the State A Administrator to investigate Logan's conduct. Furthermore, while federal covered securities are exempt from state registration requirements, they are not exempt from the anti-fraud provisions of the USA. State Administrators retain the authority to investigate and take administrative action, including suspending or revoking the registration of a state-registered individual like Logan Murphy, for fraudulent or unethical conduct even if it involves a federally covered security.
The option suggesting the Administrator lacks jurisdiction due to federal covered security status is incorrect because state anti-fraud provisions still apply, and the Administrator can take action against the registration of a state-registered person. The option about referring the complaint to State B is incorrect because State A has independent jurisdiction based on the offer originating and being received within its borders, regardless of where the acceptance occurred or where the client now resides. The option claiming the Administrator can immediately issue a final order for rescission is incorrect because, while an Administrator may ultimately order rescission, such a significant action typically requires due process, including an administrative hearing, rather than an immediate, final order bypassing such steps.
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