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.
         
  • 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.
Example
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?

Answer
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.
Example
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?

Answer
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.

 

Look Out
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.
Registration Requirements


Related Articles
  1. Professionals

    Agents: Limitations and Terminations

    FINRA/NASAA Series 63 - Agents: Limitations and Terminations. In this section rules regarding an agent's registration termination and additional information.
  2. Professionals

    Agents: Registration

    FINRA/NASAA Series 63 - Agents: Registration. This section explains the registration and exemptions for broker-dealer/agents.
  3. Professionals

    Registration Requirements

    FINRA/NASAA Series 66 - Registration Requirements. In this section Intial and post registration requirements for agents.
  4. Credit & Loans

    Buying A Home: Find An Agent

    By Amy FontinelleIf you want to buy a home, you'll need to get an agent. The most basic reason to get an agent is that you won't be able to see homes without one. (To learn more, readDo You Need ...
  5. Professionals

    Agents: Definition

    FINRA/NASAA Series 63 - Agents: Definition. This section defines an agent under the USA.
  6. Brokers

    How Real Estate Agent and Broker Fees Work

    Buying or selling a home? What you need to know about real estate agent and broker fees.
  7. Professionals

    Introduction

    FINRA/NASAA Series 66 - Regulation of Sales Representatives (Agents). This section defines and explains sales representatives or agents.
  8. Professionals

    Exempt Transactions

    FINRA/NASAA Seriex 66 - Exempt Transactions. This section lists transactions which are exempt according to the USA.
  9. Home & Auto

    Finding A Good Real Estate Agent

    Don't go it alone in the real estate market. We'll show you how to find the help you need.
  10. Professionals

    Additional Administrative Powers

    FINRA/NASAA Series 66 - Additional Administrative Powers. This section discusses the actions an administrator can take (within 1 year) if a broker-dealer withdraws its own registration after ...
RELATED TERMS
  1. Agent

    Any person who has been legally empowered to act on behalf of ...
  2. Captive Agent

    An insurance agent who only works for one insurance company. ...
  3. For Sale By Owner - FSBO

    A method of selling property without the use of an agent or broker. ...
  4. Paying Agent

    An agent who accepts payments from the issuer of a security and ...
  5. Independent Agent

    An insurance agent that sells insurance policies provided by ...
  6. Placement Agent

    An intermediary who raises capital for investment funds.
RELATED FAQS
  1. Do real estate agents get paid hourly or by salary?

    Learn about real estate commissions and how real estate agents, including listing agents, buyer's agents and real estate ... Read Answer >>
  2. How can I tell when a real estate agent might be lying to me?

    Find out what real estate agents are likely to lie about, the reasons for the lies and how to protect yourself from unscrupulous ... Read Answer >>
  3. When an agent of a broker-dealer begins employment with another broker-dealer ... ...

    The correct answer is D). When an agent moves from one broker-dealer's employ to another, all parties are responsible for ... Read Answer >>
  4. How much money do real estate agents make?

    Learn about the salaries of top earners in the real estate industry and how factors, such as location, can raise or lower ... Read Answer >>
  5. How long is the validity period for a Series 63 exam if I have not been registered?

    Find out how registration begins using Series 63 results and how long scores are valid without registration. Learn more about ... Read Answer >>
  6. Do real estate agents work on weekends?

    Learn how working weekends and evenings is one way real estate agents increase their chances of making a sale to a potential ... Read Answer >>
Hot Definitions
  1. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  2. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  3. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  4. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  5. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  6. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
Trading Center