Registration of Broker Dealers, Investment Advisers, and Agents


In this section we will examine the state registration process for broker dealers, investment advisers, and agents. An important part of this section will be to know when registration is required and when an exemption is offered to the subject in question.


Prior to conducting business in any state, a broker dealer must be properly registered or exempt from registration in that state. The first test when deciding if the broker dealer must register is determining whether the firm has an office in the state. If the firm maintains an office within the state, it must register with that state. A broker dealer wishing to become registered in a state must first file an application with the state securities administrator. The broker dealer must also pay all filing fees and sign a consent to service of process. By signing the consent to service of process, the broker dealer appoints the administrator as its attorney in fact and allows the administrator to receive legal papers for the applicant. Any legal papers received by the administrator will have the same force and effect as if they were served on the broker dealer. All applications must also include:

• Type of organization (e.g., corporation, partnership).

• Address of business.

• Description of business to be conducted.

• Backgrounds and qualifications of officers and directors.

• Disclosure of any legal actions.

• Financial condition.

The firm's registration will become effective at noon 30 days after the initial application has been received or at noon 30 days after the administrator has received the last piece of required information. Registering a broker dealer in a state automatically requires that any officers and directors who act in a sales capacity register as agents. A broker dealer will not be deemed to have a place of business in a state where it does not maintain an office simply by virtue of the fact that the firm's website is accessible from that state so long as the following conditions are met:

• The firm's website clearly states that the firm may only conduct business in states where it is properly registered to do so.

• The firm's website only provides general information about the firm and does not provide specific investment advice.

• The firm may not respond to Internet inquiries with the intent to solicit business without first meeting the registration requirements in the state of the prospective customer.

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