Section 1-305 - Denial, suspension and revocation of registration(a) The department may, by order, deny, suspend, revoke or condition any registration or may censure any registrant if it finds that such order is in the public interest and that such registrant or applicant, or in the case of any broker-dealer or investment adviser, any affiliate thereof, whether prior or subsequent to becoming associated with such person: (i) Has filed an application for registration or a document in connection with an application for registration which as of its effective date or as of a date after filing in the case of an order denying effectiveness, was incomplete in a material respect or contained a statement which was, in light of the circumstances under which it was made, false or misleading with respect to a material fact; or(ii) Has been: (A) convicted within ten years of the date of the department's action of any felony or misdemeanor, or of any substantially equivalent crime by a foreign court of competent jurisdiction, or held liable in a civil action by final judgment of a court and the department finds that such felony, misdemeanor or civil action: (I) involved the purchase or sale of any security, the taking of a false oath, the making of a false report, bribery, perjury, burglary and any substantially equivalent activity however denominated by the laws of a relevant foreign government or conspiracy to commit any such offense;(II) arose out of the conduct of the business of an issuer, broker-dealer, municipal securities dealer, government securities broker, government securities dealer, investment adviser, bank, insurance company, fiduciary, transfer agent, foreign person performing a function substantially equivalent to any of the foregoing or any entity or person required to be registered under the Commodity Exchange Act (42 Stat. 988, 7 U.S.C. § 1 et seq.) or any substantially equivalent foreign statute or regulation;(III) involved the larceny, theft, robbery, extortion, forgery, counterfeiting, fraudulent concealment, embezzlement, fraudulent conversion or misappropriation of funds or securities or any substantially equivalent activity however denominated by the laws of a relevant foreign government; or(IV) involved the violation of 18 U.S.C. § 152 (relating to concealment of assets; false oaths and claims; bribery), 1341 (relating to frauds and swindles), 1342 (relating to fictitious name or address) or 1343 (relating to fraud by wire, radio, or television) or Ch. 25 (relating to counterfeiting and forgery) or 47 (relating to fraud and false statements) or a violation of any substantially equivalent foreign statute; or(B) convicted of any other felony; or(iii) Is permanently or temporarily enjoined by any court of competent jurisdiction from engaging in or continuing any conduct or practice involving any aspect of the securities or commodities future contract business or involving fraudulent conduct in the banking or insurance business; or(iv) Is subject to (A) any currently effective order or order entered within the past five years of the Securities and Exchange Commission, the Commodity Futures Trading Commission or the securities administrator of any other state denying registration to or revoking or suspending the registration of such person as a broker-dealer, agent, investment adviser, investment adviser representative, futures commission merchant, commodity pool operator, commodity trading adviser or a person associated with a futures commission merchant, commodity pool operator or commodity trading adviser, or (B) any currently effective order of any self- regulatory organization suspending or expelling such person from membership in such self-regulatory organization, or (C) any currently effective cease and desist order or a cease and desist order entered within the past five years by the Securities and Exchange Commission, the Commodity Futures Trading Commission or the securities administrator of any other state and where, in the case of a cease and desist order entered by a state, the cease and desist order contained a finding of a wilful violation of that state's securities law, or (D) a currently effective United States Postal Service fraud order; but the department may not institute a revocation or suspension proceeding under this subsection on the basis of an order under another state law more than one year after termination of the effectiveness of the order relied on and unless the order was based on facts which would currently constitute grounds for an order under this section; or(v) Has wilfully violated any provision of the Securities Act of 1933 (48 Stat. 74, 15 U.S.C. § 77a et seq.), the Securities Exchange Act of 1934, the Trust Indenture Act of 1939 (53 Stat. 1149, 15 U.S.C. § 77aaa et seq.), the Investment Advisers Act of 1940 (54 Stat. 847, 15 U.S.C. § 80b-1 et seq.), the Investment Company Act of 1940 (54 Stat. 789, 15 U.S.C. § 80a-1 et seq.), the Commodity Exchange Act, any law of a foreign country governing or regulating any aspect of the business of securities, commodities futures or banking or this act, or of any rule, regulation or order under any of such statutes within the previous ten years; or(vi) Has wilfully aided, abetted, counseled, commanded, induced, or procured the violation by any other person of any of the statutes, rules, regulations or orders referred to in subsection (v) within the previous ten years; or(vii) Has failed reasonably to supervise his agents or employes, if he is a broker-dealer, or his investment adviser representatives or employes, if he is an investment adviser within the previous ten years; or(viii) Is the subject of a currently effective order of the department denying, suspending or revoking his registration in any other capacity under this act; or(ix) Has engaged in dishonest or unethical practices in the securities business or has taken unfair advantage of a customer within the previous ten years; or(x) Is insolvent, either in the sense that his liabilities exceed his assets or in the sense that he cannot meet his obligations as they mature, or is in such financial condition that he cannot continue in business with safety to his customers, or has not sufficient financial responsibility to carry out the obligations incident to his operations provided that the department has made a specific finding of insolvency, absence of safety or insufficient financial responsibility; or(xi) Is not qualified on the basis of such factors as training, experience and knowledge of the securities business; except as otherwise provided in subsection (b); or(xii) Is selling or has sold, or is offering or has offered for sale, in this State securities through any unregistered agent required to be registered under this act or for any broker-dealer or issuer with knowledge that such broker-dealer or issuer had not or has not complied with this act; or(xiii) Has made any material misrepresentation to or withheld or concealed from or omitted to state to the department or any of its representatives any material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading, or has refused to furnish information reasonably requested by the department within the previous ten years; or(xiv) Is subject to any currently effective order or orders entered within the past five years by any regulator of another country: (A) denying registration to or revoking or suspending the registration of such person as a broker-dealer, agent, investment adviser, investment adviser representative, futures commission merchant, commodity pool operator, commodity trading adviser or a person associated with a futures commission merchant, commodity pool operator or commodity trading adviser; or(B) denying, revoking or suspending the person's legal authorization to engage in the business of banking or insurance; or(xv) Is subject to any currently effective order of any securities exchange or self-regulatory organization operating under the authority of the securities regulator of another country suspending or expelling such person from membership in such exchange or self-regulatory association; or(xvi) Is subject to a currently effective order or orders entered within the past five years by a state insurance regulator or Federal or state banking regulator denying registration, articles of incorporation or association, certificate of organization or authorization to do business, charter or license, or revoking or suspending the registration, articles of incorporation or association, certificate of organization or authorization to do business, charter or license of such person to engage in the insurance, banking or other financial services industry, or finding that such person has engaged in fraudulent, unethical, dishonest or abusive practices in connection with any aspect of the business of insurance, banking or other financial services.(a.1) The department, by order, may deny the application of: (i) an agent or investment adviser representative if the individual is obligated pursuant to an award of an arbitration panel to pay compensation to purchasers of securities or investment advice and, as of the date the application is filed with the department, has not paid the awarded compensation to the purchasers in full and within the time period specified by the arbitration panel; or(ii) a broker-dealer or investment adviser if a promoter, director, chief executive officer, chief financial officer, chief operations officer, chief legal officer, chief compliance officer or general partner (or person occupying a similar status or performing similar functions) of the applicant held a similar position with another broker-dealer, investment adviser or federally covered adviser which entity pursuant to an award of an arbitration panel is obligated to pay compensation to purchasers of securities and, as of the date the application is filed with the department, has not paid the awarded compensation to the purchasers in full within the time period specified by the arbitration panel. The department may issue an order prospectively rescinding a denial order issued under this subsection if the person whose application has been denied under this subsection provides credible evidence that the compensation awarded by the arbitration panel which was the basis for denial of the application under this subsection has been paid in full and in cash.
(a.2) The department, by order, may suspend the registration of a broker-dealer, investment adviser, agent or investment adviser representative if such person is obligated, pursuant to an award of an arbitration panel, to pay compensation to purchasers of securities in this Commonwealth and has not paid the awarded compensation in full and in cash. The department shall rescind the suspension order prospectively if the person provides credible evidence to the department that the compensation awarded by the arbitration panel has been paid in full and in cash to purchasers of securities in this Commonwealth. Rescission of a suspension order issued under this section shall reinstate the person as a registrant in the same category held at the time the suspension order was issued but only if: (i) the person otherwise currently meets all requirements for registration in that category set forth in this act and regulations promulgated thereunder;(ii) there is no basis for the department to act pursuant to subsection (a) or (a.1); and(iii) applicable fees and compliance assessments set forth in sections 602 and 602.1 have been paid as if the person had been registered during the period of suspension.(b) The following provisions govern the application of section 305(a)(xi): (i) The department may not enter an order against a broker-dealer on the basis of the lack of qualification of any person other than (A) the broker-dealer himself if he is an individual, or (B) an agent of the broker- dealer.(ii) The department may not enter an order against an investment adviser on the basis of the lack of qualification of any person other than (A) the investment adviser himself if he is an individual, (B) any other person who represents the investment adviser in doing any of the acts which make him an investment adviser or (C) an investment adviser representative.(iii) The department may not enter an order solely on the basis of lack of experience if the applicant or registrant is qualified by training or knowledge or both.(iv) The department shall consider that an agent who will work under the supervision of a registered broker-dealer need not have the same qualifications as a broker- dealer.(v) The department shall consider that an investment adviser is not necessarily qualified solely on the basis of experience as a broker-dealer or agent. When it finds that an applicant for initial or renewal registration as a broker-dealer is not qualified as an investment adviser, it may by order condition the applicant's registration as a broker- dealer upon his not transacting business in this State as an investment adviser.(vi) The department may by rule provide for an examination, which may be written or oral or both, to be taken by any class of or all applicants, as well as persons who represent or will represent an investment adviser in doing any of the acts which make him an investment adviser.(c) The department may not institute a suspension or revocation proceeding solely on the basis of a final judicial or administrative order made known to it by the applicant prior to the effective date of the registration unless the proceeding is instituted within the next ninety days following registration. This provision shall not apply to renewals of registrations.(d) The department may by order summarily deny, postpone or suspend an application or registration pending final determination of any proceeding under this section. The order may be issued summarily without notice or hearing. Upon issuance of a summary order, the department shall promptly provide the order to the applicant or registrant and the employer or prospective employer if the applicant or registrant is an agent or investment adviser representative. The order shall contain findings of fact and conclusions of law and include a notice affording the applicant or registrant an opportunity for a hearing in accordance with section 607(a).(e) If the department finds that any registrant or applicant is no longer in existence or has ceased to do business as a broker-dealer, agent , investment adviser or investment adviser representative, or is subject to an adjudication of mental incompetence or to the control of a committee, conservator or guardian, or cannot be located after reasonable search, the department may by order revoke the registration or deny the application.(f) Withdrawal from the status of a registered broker- dealer, agent, investment adviser or investment adviser representative becomes effective on the thirtieth day after receipt of an application to withdraw, or within such shorter period as the department determines, unless a revocation or suspension proceeding is pending before the department when the application is filed or a proceeding to revoke or suspend or to impose conditions upon the withdrawal is instituted before the department within thirty days after the withdrawal application is filed. If a proceeding is so pending or instituted, withdrawal becomes effective at such time and upon such conditions as the department by order determines. If no proceeding is so pending or instituted and withdrawal automatically becomes effective, the commission may institute a revocation or suspension proceeding under subsections (a)(i), (v), (vi), (vii), (viii), (ix), (xii) and (xiii) within one year after withdrawal became effective and enter a revocation or suspension order as of the last date on which the registration was in effect.(g) No order may be entered under this section except under subsection (d) without appropriate prior notice to the applicant or registrant as well as the employer or prospective employer if the applicant or registrant is an agent or associated person, opportunity for hearing and written findings of fact and conclusions of law. In cases of denial orders, such findings and conclusions shall be provided only if requested by the applicant.(h) A person that controls, directly or indirectly, a person who is subject to an action of the department under subsection (a) may be subjected to the same discipline by the department and to the same extent as the controlled 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 the basis for the action by the department against the controlled person.Amended by P.L. 678 2014 No. 52, § 14, eff. 8/9/2014.1972, Dec. 5, P.L. 1280, No. 284, § 305, effective Jan. 1, 1973. Amended 1986, June 25, P.L. 256, No. 68, § 1, effective in 60 days; 1990, Dec. 18, P.L. 755, No. 190, § 5, effective in 60 days; 1998, Nov. 24, P.L. 829, No. 109, § 17, effective in 60 days; 2002, July 4, P.L. 721, No. 108, § 8, effective in 60 days; 2004, Nov. 23, P.L. 930, No. 132, § 2, effective Jan. 24, 2005.