Who Has To Register As A Broker Dealer

Broker Dealer Registration 101

Broker dealers are subject to regulation by the SEC, FINRA and any other Self Regulatory Organizations (

Posted by Brenda Hamilton, Securities and Going Public Lawyer

Banker-dealers are subject to regulation past the SEC, FINRA and any other Self-Regulatory Organizations ("SRO") such equally stock exchanges, as well equally the states in which they do business concern. The Securities Exchange Human action of 1934 ("Exchange Human activity") requires that any broker-dealer effecting securities transactions by means of interstate commerce exist registered. State laws too regulate broker-dealer action within their jurisdictions. Unless an exemption from registration is available, state laws crave registration of any broker-dealer doing business from or with persons in their country, as well equally the broker-dealer'southward employees doing business within the state.

Broker Dealer Activity

The determination of what constitutes broker dealer activity is a question of fact and includes:

(i) participation in the solicitation, negotiation or execution of securities transactions;

(ii) receiving transaction-based compensation; or

(iii) holding investor funds or securities.

Persons or entities that (i) concord themselves out every bit being willing to purchase and sell securities on a continuous footing or (ii) originate securities that they purchase and sell, are frequently required to annals as dealers. Underwriters, stockbrokers, market makers and other dealers must annals every bit broker-dealers pursuant to Section fifteen(b) of the Exchange Act.

Finders equally Broker-Dealers

Under some circumstances, other persons such as investment bankers, consultants, intermediaries and finders that provide services to broker-dealers may be required to register equally broker-dealers if they appoint in one or more than activities characteristic of brokers or dealers.

Exemptions from Broker Dealer Registration Requirements

Finders who act as intermediaries may exist exempt from registration under limited circumstances. Additionally, nether some circumstances, exemptions from broker-dealer registration requirements may be available. For example, Issuers who sell their own securities through insiders and employees are exempt from registration if they meet certain weather condition. Foreign broker-dealers coming together specified requirements are also exempt from U.Southward registration.

South E C Registration of Broker-Dealers

Both FINRA and the SEC require that an application be submitted and approved in order to accomplish broker-dealer registration. Broker-dealer registration with the SEC is achieved by submitting an application under Section 15(b) of the Commutation Act. The SEC must grant registration institute proceedings to determine whether registration should be denied. When the SEC grants registration, information technology does non become constructive until the broker-dealer becomes a member of FINRA. Until FINRA grants membership, a broker-dealer may non engage in any activities requiring registration including solicitation, negotiation or execution of securities transactions or the receipt of transaction based compensation.

SEC Course BD Advisory Requirements

Under SEC Rule 15b1-1, Form BD must be filed through FINRA's Central Registration Depository (CRD) system. The CRD system enables applicants to use a single course and combined payment to utilize for registration and membership in multiple jurisdictions and FINRA. Form BD consists of 13 items and schedules which require the bidder to provide detailed information.

Course BD requires disclosure of the following data about the broker-dealer applicant:

The chain of buying of the broker-dealer,
Whatever affiliations between the broker-dealer and other entities in the securities or investment advisory businesses,
Identity of the banker-dealer's officers and directors, and
The activities the banker-dealer intends to bear.

Banker-Dealer Form BD Background Requirements

Form BD requires disclosure of any violation involving the applicant'due south owners, registered employees, affiliated entities, and individuals holding senior management positions with affiliated entities, certain background data including crimes, violations of securities or investment-related laws or rules of strange financial regulatory authorities, and proceedings that might event in a finding of such violation.

FINRA & SRO Membership for Broker-Dealers

FINRA requires broker-dealer applicants to complete its New Member Application form ("NMA"). Form NMA contains xiv individual standards for FINRA membership itemized in NASD Rule 1014. Form NMA also lists the forms and supporting documents required for submission of an application. NMA requires certain mandatory information, including:

Completed Form BD,
Detailed business programme that includes the trial balance and cyberspace uppercase computations, projections, intended concern locations, the types of securities intended to be offered, description of the facilities including the proposed lease, number of markets to be made, plans to enter into any contractual arrangements such as underwriting, plans for any proprietary positions, and a description of the communications and operational systems employed to conduct business organisation and any business continuity plans.
Financial and source of capital information,
An organization nautical chart, and
Written supervisory policies, procedures, and controls.

Additional FINRA Requirements for Broker-Dealers

In improver to the NMA Application for membership, the banker-dealer application must provide a FINRA Entitlement Agreement and FINRA Account Administrator Entitlement Form for access to Web CRD. Once the banker-dealer firm is approved for access to Spider web CRD, it must electronically submit Forms U-iv (for individual broker registration), whatever subsequent amendments to its Form BD and whatever Forms U-5 (broker termination) over Web CRD.

SIPC Requirements for Banker Dealers

The broker-dealer application must also become a member of the Securities Investor Protection Corporation (SIPC), to obtain a fidelity bond and complete a Lost or Stolen Securities Plan registration.

Banker-Dealer Class U-4 Requirements

The principal officers and other persons associated with the broker-dealer intended to engage in the broker-dealer's securities or investment banking business, the broker-dealer's direction and those volition supervise its activities must submit Form U-four and provide fingerprints as well every bit pass specific exams.

FINRA requires that the broker-dealer take at to the lowest degree two securities principals and a fiscal and operations principal (FINOP).

Broker-Dealer Exams

FINRA requires the post-obit examinations:

The principal executive officer and all of the banker-dealer's other supervisory principals must pass the Series seven and Serial 24 exams;
The FINOP must pass the Serial 27 test; and
Generally, the banker-dealer'south registered representatives must pass the Serial 7 and the Series 63 Compatible Country Police force examination.

B r o m e r-Dealer's Supervisory Procedures

NASD Dominion 3010 provides that the banker-dealer must have written supervisory procedures reasonably designed to prevent and detect violations of the securities laws and NASD rules including to:

(ane) foreclose insider trading every bit required by Section 15(f) of the Exchange Deed,

(2) serve as the broker-dealer'south arrangement of supervision every bit required by NASD Rule 3010, and

(3) provide a defense against liability for the failure to supervise by the business firm and its employees under Sections 15(b)(4) and 15(b)(vi) of the Exchange Act.

NASD Dominion 3010 provides that the broker-dealer must have written supervisory procedures reasonably designed to forbid and find violations of the securities laws and NASD rules.

S tate Registration Requirements for Banker-Dealers

In addition to registration with the SEC and FINRA membership, unless an exemption is available, a broker-dealer must register in any state from or into which the broker-dealer intends to carry its securities business. The agents of the broker-dealer must too become registered in those states where the broker-dealer conducts business. Some states provide for an exemption for transactions with institutional clients. Salespersons are required to pass the Series 63 Uniform State Police exam in lodge to qualify equally a registered agent in the states.

For farther information nearly broker dealer registration and securities law, delight visit www.securitieslawyer101.com or contact Brenda Hamilton, Securities Chaser, 101 Plaza Real South, Suite 201 S, Boca Raton, Florida, 33432, at (561) 416-8956 or by e-mail at [email protected]. This information is provided equally a general advisory service to clients and friends of Hamilton & Assembly Law Group and should non be construed equally, and does not found, legal and compliance advice on whatsoever specific matter, nor does this message create an attorney-client relationship. For more information apropos the rules and regulations affecting the apply of Rule 144, Form 8K, FINRA Rule 6490, Dominion 506 private placement offerings, Regulation A, Rule 504 offerings, Rule 144, SEC reporting requirements, SEC registration on Course Southward-one and Course ten, Pink Sheet list, OTCMarkets disclosure requirements, DTC Chills, Global Locks, opposite mergers, public shells, become public direct transactions and directly public offerings, please contact Hamilton and Associates at (561) 416-8956 or [electronic mail protected]. Please annotation that the prior results discussed herein do not guarantee similar outcomes.

Hamilton & Assembly | Securities Lawyers
Brenda Hamilton, Going Public Attorney
101 Plaza Real South, Suite 202 N
Boca Raton, Florida 33432
Telephone: (561) 416-8956
Facsimile: (561) 416-2855
www.SecuritiesLawyer101.com