Five exemptions from state registration as a BD?
- Agents
- Issuers
- Banks / S&Ls / Trust Companies
- No place of business in state and transacting only with institutional clients, issuers and banks
- No place of business, registered elsewhere and only transacts with non-residents (e.g. On vacation there)
Is there an exemption from registration for agents of BDs?
If representing a registered BD in a securities transaction in a state, MUST ALWAYS REGISTER
(If client moves there, can service them for 60 days while registration pending)
What’s registration requirement if desiring to do business with a client temporarily in State A?
Both firm and agent are exempt
What are requirements of registered BDs?
- Net capital requirement
- Surety bond if custody of assets or discretionary authority
- File advertising except for Federal Covered or exempt securities/transactions
- Record keeping of three years
When might a BD have to register as an IA?
If it receives separate compensation for providing advice
Four circumstances under which BD agents may loan/borrow money or securities?
- Immediate family member
- Financial institution in that business
- Another agent at same BD (with written permission)
- Based on existing outside personal or business relationship (with written permission)
Can an agent solicit / accept an on order for unregistered non-exempt security?
Cannot solicit.
CAN accept UNSOLICITED order (may need to provide signed confirmation)
When must affiliation with an issuer be disclosed?
Before trade. If verbal before trade, must be in writing by completion.
When can they exercise discretion?
If holding discretionary authority in writing
Is a not-held order discretionary?
No - security and quantity are given and the agent’s discretion on time and price does not make the order discretionary
What are requirements for BD operating on bank premises?
- clearly separated and signed
- written networking arrangements
- disclose not FDIC insured, not bank deposit and principal at risk
- reasonable effort to get client acknowledgement in writing
- inform bank of agent termination
What’s the inspection schedule for offices and what is an effective visit?
OSJs and branch offices which supervise other offices: annually
Other branch offices: every 3 years
Unannounced, method for feedback and follow up of deficiencies
How long must account info be kept?
Six years after last update or account closed.
Who must approve an account for options trading?
Registered Options Principal
When must client verified Options Account Agreement be received?
Within 15 days or ROP approving account.
If not, no new positions can be opened.
When must client be given Options Disclosure Document?
No later than moment account is approved for options trading.
Can BD agents split commissions?
Only if both at same BD and both registered in state of transaction
Whether a BD is required to maintain a bond depends on net capital or net worth?
Net capital
For IAs it’s net worth
When do registrations expire?
December 31 - even if BD has change of ownership during year
Examples of records BDs must retain for three years?
- Advertising
- Correspondence
- Conformations
- Trade tickets
An agent must disclose what within 30 days on U4?
Tax liens and unsatisfied judgements
Form U4 must disclose felonies and securities misdemeanours from what timeframe?
Unlimited.
Disqualification will be statutory if within last 10 years.
Can a BD in State A accept an order from an IA, registered in States A and B, to purchase a security for a customer resident in State B?
Yes, as the BDs client is the IA.
BD not a BD in State B as has no place of business and transacts business with or through an institutional buyer
What does NASAA Statement of Policy say on selling away?
Agent may sell away if authorised in writing, and don’t have to be recorded on the books
