Now that you know who is excluded from the agent definition, the next question is: what triggers the registration obligation for those who ARE agents?
The General Registration Requirement
The Uniform Securities Act (USA) establishes a dual obligation:
- Agent obligation: An agent must be registered before transacting business. Violating this makes it unlawful to transact business as an unregistered agent.
- Employer obligation: A broker-dealer or issuer must not employ an unregistered agent. Violating this makes it unlawful to employ an agent who is not registered.
- Both the agent AND the employer face liability if the agent is unregistered
- The obligation runs both ways; it is not just the agent's responsibility
Exam Tip: Gotchas
- The employer is also liable for employing an unregistered agent. The obligation is not just on the agent; the broker-dealer or issuer faces its own violation for allowing unregistered individuals to transact business.
Agent Registration Is Employer-Specific
One of the most important rules about agent registration:
- An agent's registration is not effective during any period when the agent is not associated with a particular registered broker-dealer (BD) or a particular issuer
- There is no such thing as a "free-floating" agent registration
- The registration is always tied to a specific employer
- If an agent leaves their BD, the registration becomes inactive until the agent associates with a new registered BD or issuer
Triple Notification on Status Changes
When an agent begins or terminates a connection with a broker-dealer or issuer, all three parties must promptly notify the Administrator:
- The agent
- The old employer (the BD or issuer being left)
- The new employer (the BD or issuer being joined)
Exam Tip: Gotchas
- If an agent leaves Firm A to join Firm B, THREE parties must notify the Administrator: the agent, Firm A, AND Firm B. Failure of any party to provide prompt notification is a violation of the Act.
- An agent's registration goes inactive the moment the agent leaves the BD. There is no grace period. The registration only becomes active again when the agent associates with a new registered BD or issuer.
Dual Registration
- An agent may be registered with more than one broker-dealer (BD) simultaneously
- Each BD must consent to the dual registration
- Each registration is independent; termination from one BD does not affect registration with another
Exam Tip: Gotchas
- Dual registration requires consent from all BDs involved. An agent cannot simply register with a second firm without both firms agreeing to the arrangement.
When an Agent of an Excluded Broker-Dealer Need Not Register
Recall the no-place-of-business exclusion that removes certain broker-dealers (BDs) from the registration requirement in a state: the firm has no office in the state AND either deals exclusively with institutional clients (issuers, other BDs, banks, insurance companies, investment companies, pension or profit-sharing trusts, and similar institutional buyers) or deals only with an existing customer who is temporarily present in the state and is not a resident (the snowbird situation).
An agent's registration is always tied to representing a BD that is transacting business in the state. So when the employing BD is not required to register in a state because it qualifies for that exclusion, an agent representing the firm in those same excluded transactions is generally not required to register in that state either. The agent follows the firm's status.
Exam Tip: Gotchas
- An agent gets no independent "no place of business" or de minimis exclusion. The relief flows from the firm. There is no five-client de minimis for agents (just as there is none for BDs). If an agent solicits or effects a transaction with even one retail customer in a state, the agent must be registered there, with or without an office in the state.
- Do not confuse this with the agent-definition exclusions. The issuer-representative exclusions (exempt securities, exempt transactions, federal covered securities, no-commission employee sales) remove a person from the agent definition entirely. The no-place-of-business relief is different: the individual is still an agent, but is not required to register in that particular state because the firm is not transacting business there.