Quick Answer
A broker-dealer effects securities transactions for others as a broker, earning a commission, or for its own account as a dealer, earning a markup or markdown. Agents, issuers, banks, savings institutions, and trust companies are excluded outright. Any in-state office forces registration regardless of client type.
The whole unit on one sheet: what a broker-dealer is, who falls outside the definition, and the office rule everything turns on.
What Separates a Broker from a Dealer?
- A broker acts for a customer's account (agency) and earns a commission.
- A dealer trades its own account (principal) and earns a markup on sales or a markdown on purchases.
Who Is Excluded from the Definition?
- Agents, issuers selling their own securities, banks, savings institutions, and trust companies.
- Excluded is stronger than exempt. An excluded person is never a broker-dealer at all; an exempt one IS a broker-dealer but need not register.
- Bank holding companies are NOT excluded. A holding company effecting securities transactions must register.
How Does the No-Office Exclusion Work?
A firm with no place of business in the state is excluded if it meets either prong, not both:
- (A) Institutions only. It deals exclusively with issuers, other broker-dealers, banks, savings institutions, trust companies, insurance companies, investment companies, pension or profit-sharing trusts (no minimum asset size), or other institutional buyers.
- (B) The snowbird rule. It is licensed where it keeps its place of business and serves only an existing customer whose residence is not in this state.
Under prong (A) a single retail client destroys the exclusion. Prong (B) reaches a retail client by design.
What Is Canadian Limited Registration?
- A Canadian firm registered at home, a member of a Canadian self-regulatory organization, with no office or physical presence in the state, consent to service of process on file, and renewal filed before December 1, may serve two categories from Canada.
- (1) A person temporarily resident in the state with whom it had a bona fide relationship before that person entered the United States.
- (2) A person resident in the state transacting through a self-directed tax-advantaged Canadian retirement plan. This needs no prior relationship and no temporary presence.
Which Gotchas Are Tested Most?
- Place of business is the pivot. Any in-state office means register, whatever the client type. No office is necessary but never sufficient on its own.
- A pension or profit-sharing trust counts as institutional with no minimum asset size. Watch for an answer that invents a dollar threshold.
One-Breath Recap
A broker-dealer effects securities transactions for others as a broker earning a commission, or for its own account as a dealer earning a markup or markdown, and most firms are both. Agents, issuers, banks, savings institutions, and trust companies are excluded outright, though a bank holding company is not. A firm with no in-state office escapes the definition only by dealing exclusively with institutions or by qualifying as a snowbird serving an existing out-of-state customer, and any in-state office forces registration regardless.
Need more than the recap? Read the full Definition of a Broker-Dealer unit.