Investigations and Subpoenas

The State Administrator has broad investigatory powers to uncover potential violations of the Uniform Securities Act. Understanding how investigations work and the Administrator's subpoena authority is essential for the Series 63 exam.

Authority to Investigate

The Administrator may conduct investigations whenever there is reason to believe:

• A violation of the USA has occurred
• A violation of the USA is about to occur
• A rule or order issued under the USA has been violated
• A person has engaged in an act or practice requiring investigation

Sources of Investigation

Exam Tip: Most investigations are initiated based on complaints and tips from the public. The Administrator relies heavily on investors to report suspicious activity.

Public vs. Private Investigations

The Administrator may conduct investigations either publicly or privately (non-publicly):

Key Point: The Administrator determines whether an investigation is public or non-public based on the circumstances.

Subpoena Power

The Administrator has extensive subpoena power to obtain information during investigations.

What Can Be Subpoenaed?

Geographic Reach

Critical exam concept: The Administrator can issue subpoenas for persons, books, and records from any state—not just within their own jurisdiction.

Exam Alert: A State A Administrator investigating a violation can subpoena witnesses and records located in State B. This interstate reach is essential for effective securities enforcement.

Compelling Testimony

The Administrator may:

• Require persons to testify under oath
• Require written sworn statements (affidavits)
• Conduct depositions
• Examine witnesses during hearings

Administering Oaths

The Administrator (or designated officers) may administer oaths to compel truthful testimony. Lying under oath constitutes perjury—a criminal offense.

Fifth Amendment Protections

The Administrator must respect constitutional rights during investigations:

Right Against Self-Incrimination

• A person cannot be forced to testify if the testimony might be self-incriminating
• The person must assert the 5th Amendment privilege; it is not automatic
• The Administrator cannot punish someone solely for asserting 5th Amendment rights

Immunity Procedure

If the Administrator needs testimony from someone who invokes the 5th Amendment:

Key Point: A person who is compelled to testify under immunity cannot be prosecuted based on that testimony. However, they can still be prosecuted based on independently obtained evidence.

Out-of-State Investigations

The Administrator's investigative powers extend beyond state boundaries:

• May investigate conduct occurring in other states
• May subpoena persons and records from other states
• May cooperate with other state administrators
• May share investigation information with other jurisdictions

Reciprocal Assistance

State Administrators typically assist each other:

• Honor requests for subpoenas
• Share evidence and information
• Coordinate enforcement actions
• Refer matters to appropriate jurisdictions

Failure to Comply

Refusing to comply with a lawful subpoena or investigation can result in:

• Contempt proceedings
• Denial or revocation of registration
• Adverse inference (assuming the worst about what was hidden)
• Court enforcement of the subpoena

Key Takeaways

• Administrator may investigate whenever there is reason to believe a violation has occurred or may occur
• Investigations can be conducted publicly or privately
• Subpoena power extends to persons, books, and records from any state
• Administrator can compel testimony under oath
• 5th Amendment rights must be respected; immunity may be offered to obtain testimony
• A person testifying under immunity cannot be prosecuted based on that testimony
• Failure to comply with subpoenas can result in serious consequences