Registration and Post-Registration Requirements

Now that you know what makes a firm a broker-dealer, the next question is: how does it actually register? The Uniform Securities Act (USA) lays out specific filing requirements, timelines, and ongoing obligations.

Who Must Register, and Where?

• It is unlawful for any person to transact business in a state as a broker-dealer (BD) unless registered under the USA
• Registration must be obtained in each state where the BD conducts business; there is no single national registration that replaces state registration
• Federal registration with the SEC is separate from and does not satisfy state registration requirements

Key point: A BD registered with the SEC and FINRA still must register in every state where it does business. Federal and state registration are parallel requirements, not substitutes.

How Does a Broker-Dealer Register?

A broker-dealer registers by filing three things:

1. Form BD (Uniform Application for Broker-Dealer Registration)
2. Consent to service of process: appoints the state Administrator as agent for receiving legal documents
3. Filing fees as required by the state

The Administrator may also, by rule or order, require an initial applicant to publish an announcement of the application in one or more specified in-state newspapers.

Form BD Disclosures

Form BD requires disclosure of:

• Business name and EIN (tax reporting number)
• Business address and contact person
• Business history and qualifications
• Officers, directors, and partners
• Criminal history and past legal actions
• Penalties or convictions relating to the business and controlling affiliates
• Financial structure and company composition

Automatic Registration of Officers and Directors

When a BD registers, that automatically registers any partner, officer, director, or person occupying a similar status or performing similar functions who is also an agent. They do not file separate registration forms.

Exam Tip: Gotchas

Title alone does not make someone an agent. A partner, officer, or director is automatically registered only if that person otherwise meets the agent definition (representing the BD in effecting or attempting to effect securities transactions). A silent limited partner or an officer with no securities-transaction role is not automatically registered as an agent.

Successor Firms

When a BD changes legal form, merges, or is acquired, the predecessor may file an application for registration of the successor, even if the successor does not yet exist, covering the unexpired portion of the registration year. There is no filing fee for a successor application. The successor's registration becomes effective under the normal timing rule (noon of the 30th day) unless the Administrator specifies an earlier date.

Consent to Service of Process

This is a frequently tested filing with several unique characteristics:

• A one-time filing made during initial registration; never requires renewal
• Appoints the state Administrator, or the Administrator's successor in office, as the BD's legal agent to receive service of process in a noncriminal suit, action, or proceeding that arises under the Act (or its rules or orders) after the consent is filed
• Also covers process against the filer's successor executor or administrator
• Remains effective even after registration terminates; the Administrator can still receive legal documents on behalf of a former registrant
• Irrevocable: cannot be withdrawn or canceled

Exam Tip: Gotchas

• The consent to service of process survives termination and is irrevocable. A former BD that withdrew its registration 5 years ago can still be served through the state Administrator. This filing does not expire.

When Does Registration Become Effective?

• Registration becomes effective at noon on the 30th day after an application is filed, provided no denial order is in effect and no proceeding is pending against the applicant
• The Administrator may grant earlier effectiveness or may deny the application before the 30th day
• If the applicant files an amendment, the Administrator may instead defer effectiveness until noon on the 30th day after the amendment is filed
• Key terminology: registration becomes "effective," never "approved." Effectiveness is not a finding that the registrant, or any security, meets any regulatory merit standard

Exam Tip: Gotchas

• Registration becomes "effective," not "approved." The Administrator never "approves" a registration. Saying a registration was "approved" is an unlawful representation under the USA.
• The specific timing is noon on the 30th day after an application is filed, and that clock can restart at the same interval if the Administrator defers effectiveness after an amendment.

When Does Registration Expire and Renew?

• All BD registrations expire on December 31 of each year unless renewed
• Renewal requires filing a renewal application and paying applicable fees

What Financial Requirements Apply After Registration?

• Broker-dealers must maintain minimum net capital as set by the state Administrator
• If a BD meets the SEC's net capital requirements (under the Securities Exchange Act of 1934), the state cannot impose higher requirements. Federal standards preempt state standards for net capital
• The Administrator may require a bond of BDs who have custody of or discretionary authority over customer funds or securities
• A registrant whose net capital exceeds the required amount cannot be required to post a bond
• An appropriate deposit of cash or securities must be accepted in lieu of a bond
• A surety bond is a form of insurance that protects customers against losses from theft, misuse of funds, or unfulfilled commitments by the BD
• Every bond must permit suit by any person who has a civil cause of action under the Act; the Administrator may by rule extend it to non-statutory claims such as embezzlement

Exam Tip: Gotchas

• States cannot set net capital requirements higher than the SEC's. This is one of the few areas where federal law preempts state law on the Series 63. If a question asks whether a state can require a higher net capital than the SEC minimum, the answer is no.

What Must a Broker-Dealer Do After It Is Registered?

Once registered, every BD must:

• Make and keep such accounts, correspondence, memoranda, papers, books, and other records as the Administrator prescribes by rule or order, subject to the governing federal recordkeeping standards
• File such financial reports as the Administrator prescribes by rule or order, again subject to the federal standards
• Promptly correct a filing that becomes materially inaccurate or incomplete, unless that correction was already supplied through the required agent-association notice
• Submit to reasonable periodic, special, or other examinations of its required records by the Administrator's representatives, inside or outside the state

Exam Tip: Gotchas

The Administrator's recordkeeping, reporting, and bonding authority over a BD is subject to the same federal preemption that caps net capital requirements: state rules in these areas cannot differ from or add to the federal standard.

What Should You Check on Exam Day?

• Confirm registration is required per state, not once nationally, and that federal SEC/FINRA registration never substitutes for it.
• Check whether a partner, officer, or director in a fact pattern actually functions as an agent before assuming automatic registration applies to that person.
• Anchor the effective-date default (noon, 30th day) and know the two ways the Administrator can move it: earlier by rule or order, or later by deferring after an amendment.
• On a net-capital or bonding question, look for the federal preemption angle: states cannot impose requirements that differ from or add to the federal standard, and a registrant whose net capital already exceeds the required amount cannot be forced to post a bond.