Registration of BD's IA's and Agents Flashcards
Who does Broker-Dealer Register With
SEC
and
states where they
have an office
or
have residential clients.
(if they only have institutional clients they don’t have to register in that state)
Net Capital Requirements
SEC sets how much financial liquidity they need in order to operate their business
Focus Reports
The report Broker-Dealers File to show their net capital
States increasing capital requirements
No state may require a broker dealer to have a higher capital requirement than SEC
Where do agents of Broker-dealers register
In the states they:
-Work
-Live
and
-Have ClientsHow Do Broker-Dealers Register
B/D file an application with the state Admin,
Pay the registration fee
File Consent to Service of Process
Consent to Service of Process
an agreement where the B/D agrees that any resident with in that state who wishes to sue the B/D can serve those papers to the state admin instead of them so that the state admin is in the loop as well
How Do Agents Register
Steps:
1) Pass the required exam
2) Submit application
3) Submit form ADV part 1A and 1B
4) Submit filing fee (No Capital Requirements Allowed)
5) Submit consent to service of process
Registration effective 30 days from last required submission
No fingerprints required
Does passing the exam grant a license
no the state admin does
Agent Changing Broker-Dealers
Registration licenses are not transferable if you wish to leave one Firm and work for another one.
Old employer would fill out and submit a U5 Form (this terminates their registration with that firm) New employer and the agent would fill out and submit a U4 Form
U5 Form
when an agent changes broker-dealers
the old employer fill out U5 form
this terminates their registration with that firm
U4 Form
when an agent changes broker-dealers
the new employer and agent fill out U4 form
this transfers registration of agent to new broker-dealer
Rush Order
The administrator may allow registrations to become effective in less than 30 days
Any registration that was granted in less than 30 days is a rush order
Investment Advisor - who to Register with
- If AUM greater than $110 million AUM = SEC Registration
- If in between 100 and 110 million IA can choose SEC or State
If federally registered IA’s assets fall to less than$90 million AUM they must file ADVW and have 180 days to register in the states.
IA’s Capital Requirements
Custody Of Clients Assets -
-State Advisors without custody
of clients assets = $10,000
-State Advisors with custody
Of client assets = $35,000
-All federally registered advisors = No capital requirement
If state advisor falls below required capital they are required to notify the administrator by end of the next business day. Then they have one more business day to file financial reports or to post a bond
If the Advisor has more than 1 state they are registering in and they have different capital requirements then the advisor only has to fulfill the capital requirement of the state they are a resident of.
Custody of Client Funds
You have custody IF any of the following apply:
1) Means you have physical control of clients Funds
2) You have the ability to withdraw funds or securities from a clients account
3) Partnership or other arrangement giving legal ownership
Can deduct fees upon notice
Inadvertently receives check made payable to client and not returned in 72 hours
FREE CARD
FREE CARD
Is State Advisor Required To Register In a State?
an office in that state
OR
have no clients but they solicit themselves
OR
If they have helped more than 5 residential clients in 12 months in that state
= Yes they must register in that state
If they only serve institutions = they don’t need to register
Is SEC Registered Adviser Required To Register With the States?
NO NEVER required to register within the state
Agents still have their filing requirements though (they have to pay their state fees)
Amendments and updates to form ADV
Must file annual ADV within 90 days of FYE stating their AUM
They must also report changes in their: - Name - Location - Recordkeeping - Disciplinary History - Custody (holding clients Assets) ADV Part E (used by IA's who have custody of clients asset
Agents Of Issuers
If an agent represents and are selling any of the following do they need to register
Represents - Securities - Is registration required
US Government - Bill Notes Bonds - NO
State Government - Bonds - NO
Corporation - Commercial Paper - NO
Corporation - 401k no comp - NO
Corporation - Stock / Franchises - NO
Control Persons Within an IA
Officers Partners and Directors
Anyone who can vote 25% or more on decisions or has 25% ownership of the IA
Chief portfolio managers are NOT control people
Activities You Can Do While Registration Is Pending:
They may not engage in any activity that would require them to have a license.
- Post trades to client account (they are just doing a data input activity)
- Send Invitations to seminars
- Assist in preparing research
- Ask prospects if they would like to speak with a registered agent
Sports and Entertainment Representatives Must register if:
They provide advice covering investments, taxes, budgeting, etc…
