Agents

Question 1

What is an agent in the context of the USA?

Answer 1

An agent is a person who represents a broker-dealer or an issuer when buying or selling securities. They can be compensated based on salary or commission. If they fit this definition, they must be registered in each state where they do business or be exempt from registration in that state.

Question 2

What is an alternative term for a broker-dealer agent?

Answer 2

Registered representative or securities salesperson.

Question 3

Certain individuals who represent an issuer in transactions of certain exempt securities are not considered agents.

Answer 3

U.S. government bonds and government agency securities
Municipal securities
Canadian government and municipal securities
Securities issued by recognized foreign governments
Securities issued by domestic banks, savings institutions, and trust companies
Investment-grade promissory notes (commercial paper) and bankers’ acceptances, if they mature in 9 months (270 days) or less and have minimum denominations of at least $50,000
Investment contracts issued in connection with an employees’ stock purchase, savings, pension, profit-sharing, or similar benefit plan
Certain federal covered securities

Question 4

a person who represents an issuer in an exempt transaction is not considered an agent under the USA. Exempt transactions are typically private and not offered to the public. Examples are

Answer 4

Unsolicited brokerage transactions
Transactions between underwriters and issuers
Transactions with institutions
Transactions with institutional buyers or qualified purchasers
Private placement offerings

Question 5

Who is excluded from the definition of an agent under the USA when representing an issuer in transactions involving that issuer’s securities with employees of the issuer?

Answer 5

A person who represents an issuer in transactions with employees of that issuer involving that issuer’s securities, and who receives no commissions or compensation specific to those transactions, is excluded from the definition of an agent under the USA.

Question 6

Exclusions for issuer agents

Answer 6

Sales of specified exempt securites
exempt txns
sales of covered securites
sales to employees of the issuer where there is no compensation

Question 7

Exemptions of agents

Answer 7

Agents of exempt BDs
Canadian BDs

Question 8

When is an individual working for a BD not required to register?

Answer 8

When they are not working in a sales capacity or when they are an agent of an exempt BD.

Question 9

How long can an agent continue to engage in securities activity with a customer who moves to another state before needing to register in that state, and what is required to qualify for this grace period?

Answer 9

may engage in securities activity with that client for a period of 60 days or less.

Question 10

what is required to qualify for the 60 day grace period?

Answer 10

an application to register in the state in which the client is now a resident must be filed within 10 business days of a transaction with the client in the new state, or the discovery by the agent of the client’s change in residence, whichever is later.

Question 11

What are the three conditions that must be met for either broker-dealer agent exception to apply in a specific state?

Answer 11

The agent must be eligible to register in the state in which the existing customer is temporarily located.
The agent must be registered with a registered securities association (i.e., FINRA) and at least one state.
The broker-dealer of the agent must be registered in that same state.

Question 12

Unless exempt from registration, where must an agent always be registered?

Answer 12

An agent must be registered in the state where their customer resides unless they are exempt from registration even if the securities involved are exempt from state registration requirements.

Question 13

When is an agent required to post a surety bond?

Answer 13

If an agent will have discretionary authority over a client’s funds or securities, the Administrator will require the agent to post a surety bond as a type of insurance to cover some of the damages that may result from legal action taken against the agent.

Question 14

Are agents allowed to represent or be employed by more than one broker-dealer or issuer at a time in most states?

Answer 14

No, Most states do not allow an agent to represent or be employed by more than one broker-dealer or issuer at a time unless both are affiliated by common control or authorized by rule or order of the Administrator.

Question 15

What must an agent do if the state allows multiple registrations?

Answer 15

If the state allows multiple registrations, the agent must complete the registration process separately and disclose this to each broker-dealer.

Question 16

What information does the Administrator require from an agent upon initial registration?

Answer 16

The Administrator requires the agent to file the same information as provided on the standardized/uniform application upon initial registration.

Question 17

What is the name of the standardized application that the Administrator accepts for agent registration?

Answer 17

The Administrator accepts standardized applications (Form U4 for agents) filed through a designee such as the Central Registration Depository (CRD).

Question 18

Is passing a qualification exam a requirement for agent registration?

Answer 18

yes Agents must pass a qualification exam as part of the registration process.

Question 19

Does a broker-dealer agent have to meet a minimum net capital requirement for registration?

Answer 19

no A broker-dealer agent does not have to meet a minimum net capital requirement for registration.

Question 20

What is the consequence of an agent not being employed by a broker-dealer before registering in a state?

Answer 20

An agent cannot register in a state without first being employed by a broker-dealer.

Question 21

What is the status of an agent’s registration when they are not employed by, or associated with, a broker-dealer who is either registered or exempt from registration?

Answer 21

The agent’s registration is not effective while the agent is not employed by, or associated with, a broker-dealer who is either registered or exempt from registration.