What Is a Registered Representative (RR)
A registered representative (RR) is a person who works for a brokerage company and serves as a representative for clients trading investment products such as stocks, bonds, and mutual funds. Registered representatives are also known as brokers.
Understanding Registered Representatives (RR)
Registered representatives can buy and sell securities for clients. They are primarily known as transaction-based service providers. To carry out these transactions a registered representative must be licensed to sell the designated securities. They must also be sponsored by a firm registered with the Financial Industry Regulatory Authority (FINRA).
To become licensed as a registered representative for a sponsoring firm, a person must pass the Series 7 and Series 63 securities examinations. These exams are administered by FINRA. The Series 7 license allows the registered representative to buy and sell stocks, mutual funds, options, municipal securities and some variable contracts for their clients. The Series 63 license allows the representative to trade variable annuities and unit investment trusts. A substantial portion of the Series 63 exam is focused on state securities requirements across the U.S. Other licenses may also apply for various other types of transactions. Compare and contrast with Series 66 licenses.
Standards for Registered Representatives
Investors seek registered representatives to carry out financial market transactions on their behalf. Registered representatives typically have access to a full range of market trading capabilities which fit the needs of their investors. They may also be able to execute thinly traded securities or have access to new securities launches.
Registered representatives differ from registered investment advisors. Registered representatives are governed by suitability standards while registered investment advisors are governed by fiduciary standards. Registered representatives are transaction-based service providers. U.S. regulators require that registered representatives ensure an investment is suitable for an investor given their investment profile. They also ensure that trades are executed efficiently. Investors will incur sales charges determined by securities issuers when dealing with a registered representative. Registered investment advisors seek to offer more holistic financial plans and investing services. They offer very different fee schedules and are typically fee-based by assets under management. Registered investment advisors are regulated by fiduciary standards which go beyond standard suitability. Registered investment advisors develop comprehensive financial plans and must ensure the best interest of the client.
Identifying a Registered Representative
Investors seeking the services of a registered representative will find a range of options in the investment market. Companies like Charles Schwab offer discount and full-service brokerage services. With Charles Schwab an investor can place electronic trades at a discounted cost. The discount brokerage service offers a registered representative call center where a client can speak with a broker to execute trades. Charles Schwab also offers full-service brokers that work as account executives for clients and support a broad range of trading activities.
FINRA also offers a service called BrokerCheck. Through BrokerCheck an investor can research the experience of brokers and brokerage firms.
Past Activities That Can Disqualify You
There are several events that could either prevent a person from becoming a Registered Representative, or that would result in the loss of membership or registration.
According to FINRA, you could be subject to a "statutory disqualification" under the Exchange Act if you:
- were convicted, or pled guilty or no contest to any felony.
- were charged or convicted with a misdemeanor involving investments and related to fraud, extortion, bribery, or other unethical activities.
- were involved in arbitration or civil litigation in which you were found to violate sales practices.
- received a final order, from a state securities commission, state authority, federal banking agency, etc., that barred you from an association to that authority or from engaging in securities, insurance, banking and other financial services.
- participated in fraudulent, manipulative, or deceptive conduct that violated any applicable laws or regulations.
- had registration revoked or suspended from an accountant, attorney or federal contractor role.
- filed for bankruptcy within the last 10 years.
- made a false statement or omitted material information.
Note that the following items are a brief summary of the disclosure questions on form U-4 FINRA provides a detailed summary of the statutory disqualification process.