Broker-dealers Flashcards
agency capacity of broker means?
A firm that is in the business of effecting transactions for the accounts of others
principal capacity as a dealer means?
A firm that is in the business of effecting transactions for its own account may be referred to as a market maker
The following are excluded and are not broker-dealers
Agents
Issuers (except when transacting business in securities other than its own)
Bank, savings institutions, or trust companies
Broker-Dealer Institutional Exclusion
A broker-dealer that has no place of business in the state and only effects transactions with other broker-dealers, institutional investors, or the issuer of the security
Broker-Dealer Retail Customer (Snowbird) Exclusion
A broker-dealer that has no place of business in a state and only effects securities transactions with existing customers who are temporarily in the other state and NOT residents of the state is not considered a broker-dealer.
Canadian Broker-Dealer Exemption
An exemption from registration as a broker-dealer applies to Canadian firms doing business with existing retail customers who are temporarily in the U.S
What do Canadian broker-dealers and agents need to do to register with a state regulator in the US?
They need to submit an application and agree to be subject to legal jurisdiction in that state. Additionally, the broker-dealer must be a member of a self-regulatory organization in Canada.
How long does it take for registration to become effective?
Typically, registration becomes effective 30 days after an application is filed.
When must registration be renewed to continue doing business in a state?
Registration must be renewed annually by December 31st.
Canadian broker-dealers and agents who register with a state regulator in the US must:
Keep their registration in good standing in their province or territory
Broker-dealers must maintain good standing membership in a self-regulatory organization (SRO) in Canada, and provide the state regulator with business records if requested
Notify the state regulator of any criminal charges resulting from regulatory action involving fraud, theft, deceit, or misrepresentation
Canadian firms may be exempt from registration as a broker-dealer in the US if they:
Do business with existing retail customers temporarily in the US
Only effect transactions in Canadian self-directed tax advantage retirement accounts for residents of a state
Are registered as a broker-dealer in Canada, but don’t have a place of business in the state
Sign a consent to service of process and disclose to US clients that they have limited registration and are subject to anti-fraud provisions
May not solicit new clients in a state under this exemption, but must follow the registration process if they do
List of all BD Exlusions
Agents
Depository institutions (aka banks)
issuers
institutional exclusion
Snow bird exclusion
List of BD exemptions
Canadian bd with no office in state and doing txns for cms temporarily in the U.S or Dealing with Canadian retirement plans
What are M&A advisers or finders?
Professionals who provide advice on company acquisitions or identify potential acquisition targets.
When are M&A advisers or finders defined as broker-dealers under the USA?
When they are being compensated on the closing of a deal and the compensation is based on the purchase or sale of corporate securities.
What is the difference between an M&A adviser and an M&A finder?
An M&A adviser gives advice on the acquisition of companies, while an M&A finder identifies potential acquisition targets.
What is the basis for compensation for M&A professionals that defines them as broker-dealers?
The purchase or sale of corporate securities.
What information does the state Administrator require from broker-dealers to register
The same information that would be required by the SEC, which can be filed using standardized applications like Form BD through a designee such as the Central Registration Depository (CRD). Additionally, one or more officers of a broker-dealer may be required to pass a qualification exam as part of the registration process.
Can the State Administrator set a net capital requirement that exceeds the SEC’s requirement for registered broker-dealers?
No, the State Administrator cannot set a net capital requirement that exceeds the SEC’s requirement.
What is required of a broker-dealer that has custody or discretionary authority over client accounts?
The Administrator will require the firm to post a surety bond that guarantees the protection of customer assets. In lieu of a bond, the Administrator must accept an appropriate deposit of cash or securities.
