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 the following:

  • 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, and/or any felony convictions - including those not related to the securities markets

Initial Financial Requirements - Surety Bonds
At any time, the Administrator has the power to demand minimum financial requirements for any/all broker-dealers.
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."
     
  • Paraphrased: If a broker-dealer or an investment advisor is not meeting the imposed requirements, it should immediately notify the Administrator.

Exam Tips and Tricks
Administrators have the ability to require broker-dealers or investment advisors to carry bonds (Surety or Fidelity) if the broker-dealers or IAs have discretionary authorization or hold client funds. If the Administrator thinks a situation is risky to the client, he or 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.

Fees
Filing fees are required by the Administrator, usually on an annual basis. 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 subsidiary can use the previous company's remaining filing fee, but must file a new application.
 

Look Out!
You might see a question on the test regarding the transferability of annual fees. Remember that fees are transferable and applications are not.


Testing
Administrators can reserve the right to require applicants to take an examination - either oral or written.
 

Exam Tips and Tricks
Most likely, questions about broker-dealer regulation under the Uniform Securities Act will include investment advisors as well. For example:

 

The state Administrator can require the filing of an application, the consent to service of process, and a filing fee from all of the following EXCEPT:

  1. an investment advisor.
  2. an investment advisor representative.
  3. a federal covered advisor.
  4. a broker-dealer registered representative.
The correct answer is "c", since the Administrator cannot require an application from a federal covered advisor but does have jurisdiction over broker-dealers and their representatives who do business in the state.

Update
 

  • If a broker-dealer has any material change in vital information (e.g. address) at any time, it is to notify the Administrator immediately.
     
  • Records of a broker-dealer must be kept for a minimum of three years.

Financial reports must be filed annually - and even quarterly, in some special cases - with the Administrator.

  • Usually, all advertising and promotional material must be filed with the Administrator, unless exempt on either a security or transaction basis.
Post Registration Requirements

Related Articles
  1. Investing

    Top 25 Broker-Dealer Firms as of October 2017

    These are the top 25 broker-dealer firms based on assets under management.
  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. 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.
  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. Financial Advisor

    Steps to Starting Up an Independent Broker Dealer

    Launching your own broker-dealer is a lot of work, but the potential payoff is great, both personally and financially.
  6. 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.
  7. 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.
  8. 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.
  9. Financial Advisor

    The Fiduciary Rule: What Will Implementation Cost?

    Compliance with the new fiduciary rule is proving to be costly for many firms.
  10. Financial Advisor

    Succeeding At The Series 63 Exam

    Your career as a securities agent begins with this test. We'll show you how to score high.
Frequently Asked Questions
  1. Is it possible for a country to have a comparative advantage in everything?

    Learn whether one country can have a comparative advantage in everything and what the difference between comparative advantage ...
  2. What's the difference between publicly- and privately-held companies?

    Privately-held companies are owned by the company's founders, management, or private investors. Public companies are owned ...
  3. What Are Short-Term Investment Options?

    If you only have a short period of time in which to invest your money, there are several short-term investment options you ...
  4. What are leading, lagging and coincident indicators?

    Leading indicators move ahead of the economic cycle, coincident indicators move with the economy, and lagging indicators ...
Trading Center