Registrations of Persons - Broker Dealer: Initial Registration

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
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