Registration & Licensing - Requirements

Question 1

Can a broker-dealer or agent transact business in a State as such without being registered there?

Answer 1

No.

Question 2

What do broker-dealers use to register with the SEC?

Answer 2

Form BD

Question 3

Do BDs register with the SEC or a SRO (self-regulatory organization) first?

Answer 3

The SEC. Then the BD registers with an SRO like FINRA. Form BD has the broker-dealer check off the SRO(s) to which it is applying for membership.

Question 4

How does a BD register in the State?

Answer 4

Form BD has the broker-dealer check off the States it wants to register in. The State(s) then uses the SEC approved BD application as the basis for registering the BD in the State so long as the registration fee is paid.

Question 5

Can an agent be employed by a broker-dealer without being registered?

Answer 5

No.

Question 6

What happens if an agent is no longer employed by a given firm?

Answer 6

His registration ceases to be effective in the State.

Question 7

Can agents be affiliated with more than one BD at a time?

Answer 7

No - though some states allow “dual registration”

Question 8

What is required of an agent if the State Administrator allows multiple registrations for an agent?

Answer 8

A separate registration application is filed by the agent through each broker-dealer. Part of the application is a disclosure to the broker-dealer of any other current registrations held by that agent.

Question 9

What is an agent required to do when he begins or terminates employment with a broker-dealer?

Answer 9

Promptly notify the State’s Administrator.

Question 10

What happens if a broker-dealer loses its registration?

Answer 10

Its agents are no longer registered with that firm, but they may associate with another firm who “picks up” their registration.

Question 11

What happens to a broker-dealer if an agent loses his or her registration?

Answer 11

No effect.

Question 12

Can agents register individually with the State Administrator?

Answer 12

No - their registration is performed through the broker-dealer.

Question 13

Firms EXCLUDED from the definition of broker-dealer - broad summary

Answer 13

A broker-dealer is excluded from registration if:

The firm has no place of business in a State and transacts solely with issuers, other broker-dealers, and institutional investors;

The firm has no place of business in a State where an existing customer is vacationing and contacts the customer in that State.

Question 14

Firms considered EXEMPT from definition of broker-dealer

Answer 14

Canadian broker-dealers with no place of business in a State, whose customers are temporarily residing in that State for less than 1/2 year and who intend to return to Canada.

Question 15

Are agents associated with excluded or exempt broker-dealers required to register with the State?

Answer 15

No.

Question 16

Individuals EXCLUDED from the definition of Agent

Answer 16

These are individuals who represent issuers (not broker-dealers):

in trades of exempt securities

in exempt transactions

in covered transactions (the sale of private placement securities or the sale of securities to qualified purchasers - investors with at least $5,000,000 invested; or investment managers with at least $25,000,000 under management)

selling securities to the issuer’s employees (as long as no commissions are paid)

Question 17

Are investment advisers required to register in the State?

Answer 17

Yes, unless that person is exempt from licensing.

Question 18

Rule for IAs in hiring IARs

Answer 18

It is unlawful for IA that is required to be registered to employ an IAR unless that representative is registered.

Question 19

What is required when an IAR begins or terminates employment with an IA?

Answer 19

The IA must promptly notify the Administrator.

Question 20

T/F: IAs cannot employ, directly or indirectly, any person who has been suspended or barred by the Administrator from association with a broker-dealer or investment adviser.

Answer 20

True.

Question 21

Persons who are EXCLUDED from the definition of an investment adviser

Answer 21

Investment Adviser Representatives (employees of IAs)

Depository Institutions (Banks, Savings and Loans, Trusts)

Professionals (lawyers, accountants, teachers, engineers whose performance of services are incidental)

Broker-Dealers (broker-dealers whose performance of these services is incidental)

Publishers of newsletters that do not give advice based upon specific investment situations

Federal Covered Adviser (100M or more AUM, adviser to registered investment companies)

Question 22

What must federal covered advisers that register with the SEC do in each State where they conduct busineses?

Answer 22

File notice in the State along with a consent to service of process; pay a state filing fee

Question 23

Advisers who are EXEMPT from the licensing and registration requirements

Answer 23

These are advisers with no place of business in the State whose only clients in the State consist of:

Other investment advisers and Federal covered advisers

Broker-Dealers

Banks, Trust companies, and Savings and Loans

Insurance Companies

Investment Companies

Employee Benefit Plans with Assets of at least $1M

Government Agencies

Advisers with no more than 5 clients in State in past year (except financial or institutional investors)

Canadian advisers with no place of business in the US when effecting business with pre-existing customers who are temporarily residing in the US and will return less than 1/2 year to Canada

Anyone so designated by the Administrator

Question 24

Short summary - exemptions for advisers with no place of business in State

Answer 24

Those who:

deal only with professionals (not the public)

have 5 or fewer clients in the State

are Canadian advisers with pre-existing customers that are Canadian citizens temporarily residing in the US

Question 25

T/F: the Uniform Securities Act requires the registration of ALL investment adviser representatives that transact business in a State, whether they are associated with a state registered investment adviser or a federal covered adviser.

Answer 25

True.

Question 26

Are solicitors for investment advisers required to be registered in the State, even if they are not employees of that adviser?

Answer 26

Yes

Question 27

What happens to an IAR's registration if he or she ceases to work for an IA?

Answer 27

It is no longer effective.

Question 28

Who is required to notify the Administrator when a representative begins or terminates employment with an investment adviser (State registered adviser)?

Answer 28

The investment adviser | note that this differs from the notification requirement for the agent of a broker dealer that changes employment

Question 29

Who is required to notify the Administrator when a representative begins or terminates employment with a federal covered adviser?

Answer 29

The representative. (note that for federal covered advisers, since the advisory firm is not registered in the State, the Administrator cannot require the advisory firm to give notice. Since the representative is required to register in the State, only the representative is required to give prompt notice).