Regulation of Sales Representatives (Agents) - Sales Representatives (Agents): Exceptions
- Assistants such as sales assistants and office personnel are not considered agents so long as their activities do not aid in securities transactions. In other words, as long as a secretary's duties are solely confined to office assistance, he or she is not an agent.
In addition to office personnel, there are several categories of transactions that exempt personnel from registration.
Transactions of the following securities are exempt from registration:
- Any/all Canadian securities
- Commercial paper maturing in nine months or less, and with a value of $50,000 or less
- Employee savings, pensions, profit-sharing or purchase plans
- U.S. federal and municipal securities
- Any/all employees transacting exempt issues from institutions such as: banks, financial institutions and/or the government
The following transactions are also exempt from registration:
- Any transaction between the issuer and underwriter
- Transactions between savings and trust companies
- Transactions with/between employees of a firm (e.g. general employees, executives or directors) of an issuer, as long as no commission is transacted. The key to this exemption is that no commission is charged.
- Transactions of the following securities are exempt from registration:
Finally, there are two other types of transactions that are exempt from registration - both include actual clients:
- Transactions with clients just visiting another state, assuming the client is only visiting the other state for a maximum of 30 days.
If broker Sam Shenanigan calls one of his best customers while she is on her Lear jet over Mississippi and he effects a transaction to sell some of her stock, does he have to be registered in that state?
No, because Shenanigan's client was simply visiting (or, in this case, flying over) the state.
An agent can effect transactions - only with existing customers - in a state if his or her registration is pending (but not approved) for up to 60 days, assuming the following:
- He or she is registered in another state.
- The broker-dealer the agent represents is registered in the state.
- There must not be an injunction restricting the agent from registration in another state.
- An agent can effect transactions - only with existing customers - in a state if his or her registration is pending (but not approved) for up to 60 days, assuming the following:
Jane decides one day that she's had it with New York, where she is a registered agent. Consequently, she throws all her stuff into a suitcase and relocates to sunny California, where she gets a job with the broker-dealer Flashy Cali, Inc. With the consent of her new firm, Jane starts effecting transactions with existing customers who also recently moved to the state. She operates for the first 56 days, until the Administrator informs her that her registration is active. Because Jane began effecting transactions before she had actually received registration approval from the Administrator, did she commit any fraudulent activity?
No, assuming her registration was never revoked in another state, she is safe because her new firm, Flashy Cali, Inc, is registered in California. However, while in the 60-day window, Jane can only conduct transactions with existing customers who have moved into the state; she cannot solicit new business until her registration is active.
Exam Tips and Tricks
Series 66 Exam Flash Card - Agent
Go down this list of items when trying to determine if a person is an agent requiring registration: If you receive direct compensation from a commission, you must register as an agent. If you represent a broker-dealer that charges commissions or an underwriting fee, you must register as an agent. If you do not charge a commission and are effecting exempt transactions and/or transacting exempt securities, you do not need to register as an agent. However, unless you are representing some sort of government-oriented entity, you usually do need to register. For example, if you represent a firm that doesn\'t charge a commission for the sale of a municipal or federal security, but does receive an underwriting fee, you have to register.
Regardless of exemptions, if you accept a commission/compensation based on the sale of a security - you are an agent, and registration as an agent is required.
Exam Tips and Tricks
Expect to see a question similar to the following on your upcoming Series 66 exam: "If you are office personnel and do not benefit from a commission, are you an agent?" The answer is no. Assistants who simply provide price and/or supporting information are not agents.
Additional information provided by the USA regarding agents:
- Limitation of affiliations: The USA "limits agents to a single employment or affiliation unless a rule or order of the Administrator authorizes multiple affiliations." In short, an agent can only represent one firm, unless he or she gets approval from the Administrator.
- There are no specific minimum financial requirements to register as an agent, although the Administrator reserves the right to require the agent, or broker-dealer, to post a bond.
- If the agent becomes insolvent (i.e. bankrupt), registration may be terminated.
- Multiple agents may split commissions, as long as they are employed by the same parent broker-dealer. Furthermore, transactions from a state can only benefit more than one agent if the agents are both registered in that particular state.