Initial registration for a broker-dealer is very simple. If a person or an entity falls under the definition of a broker-dealer, he/she/it MUST register as a broker-dealer. To register, the prospective broker-dealer must file an application with the state.

The initial application includes:

  • Name of business·
  • Address of business
  • Type of business to be conducted·
  • Qualifications of partners, directors and officers, including work history and financial solubility
  • Any/all negative history including:
    • securities related misdemeanor convictions
    • Administrative orders
    • Any felony convictions, including those NOT related to the securities markets.

Initial Financial Requirements - Surety Bonds
At any time, the Administrator holds the power to demand that any/all broker-dealers meet minimum financial requirements or post surety bonds.

Specifically, the USA states:

  • "A licensed broker-dealer who is not registered under the Securities Exchange Act of 1934 must maintain minimum net capital and a prescribed ratio between net capital and aggregate indebtedness, which may vary with type or class of broker-dealer;"

  • "The Administrator by rule may require a fidelity bond from a broker-dealer who is not registered under the Securities Exchange Act of 1934."

  • In other words, if a broker-dealer or investment adviser is not meeting the imposed requirements, the Administrator should be notified immediately.


Exam Tips and Tricks
Administrators have the ability to require broker-dealers or investment advisers to carry bonds (surety or fidelity) - if the aforementioned persons/entities have discretionary authorization or hold client funds. If the Administrator feels that a situation is risky for clients, he/she may require bonds to protect against possible excessive losses. In addition, the Administrator may require a broker-dealer to maintain a minimum amount of net (liquid) capital not to exceed those requirements already established by federal rules (SEC).


Broker Dealer: Fees
The Administrator, usually on an annual basis, requires filing fees. If an application is rejected for any reason, the Administrator retains the right to keep part of the fee.

Fees are transferable, applications are not. A broker-dealer with several subsidiaries that purchases a new subsidiary can use the previous company's remaining filing fee for the year, but must file a new application.


Exam Tips and Tricks
You might see a question on the test regarding the transferability of annual fees. Remember: fees are transferable, applications are not.



Broker-Dealer: Membership Maintainance

Related Articles
  1. Financial Advisor

    The Pros & Cons of Partnering with a Broker/Dealer

    Financial advisors must determine a business model that meets their needs and meets the expectations of their clients.
  2. Financial Advisor

    What are the Different Types of Financial Advisors?

    There are two primary types of financial advisors: investment advisors and investment brokers, who work for broker-dealers.
  3. Investing

    Decline Of The Independent Broker-Dealer

    Since the financial crisis of 2008-2009 the numbers of independent broker-dealers have been steadily declining. Find out why, and if the trend will continue.
  4. Financial Advisor

    Series 63 Exam Prep: The Broker-Dealer

    Before you take the series 63, you need to understand jurisdiction and how it affects broker-dealers.
  5. Personal Finance

    Working For An Independent Broker-Dealer Vs. A Big Bank

    Here is an overview of what broker-dealers and big banks have to offer to employees and the different opportunities available.
  6. Financial Advisor

    How Brokers Are Compensated for Selling Bonds

    Find out how brokers are paid for selling bonds and how the transaction costs are passed on to the investor through a markup or commission.
  7. Tech

    How the New Fiduciary Rule Will Hit Broker-Dealers

    While the new rules are likely to impact all financial advisors, it is expected that those in the brokerage world will be hit the hardest. Here's why.
  8. Financial Advisor

    Why the Fiduciary Rule Might Drive Fees Back Up

    The DoL’s new fiduciary rule will have a big impact upon the fee structure that is used by many broker-dealers, and clients could end up paying more.
  9. Financial Advisor

    Becoming A Registered Investment Advisor

    To become a registered investment advisor requires specific licensing, qualifications and regulations, but the greater freedom may be worth it.
  10. Financial Advisor

    Should You Offer Alternative Investments?

    Find out what problems arise for financial representatives when they start to diversify their client offerings.
Frequently Asked Questions
  1. Why is social responsibility important to a business?

    Take social responsibility seriously, and your business could benefit from happier, more productive staff members while helping ...
  2. Which socially responsible retailers appeal most to ethical investors?

    Learn why ethical investors have many options in the retail sector, and discover which retail companies are most popular ...
  3. What are Some Examples of Free Market Economies?

    Learn which of the world's economies best resemble free market economies, marked by free trade, low government involvement, ...
  4. Who Decides When to Print money in India?

    Find out the role of the Reserve Bank of India, or RBI, and the amount of authority given to the government. Learn who is ...
Trading Center