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.

Registration Requirement

• 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.

Registration Procedure

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

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, its partners, officers, and directors are automatically registered as part of the firm. They do not file separate registration forms.

Successor Firms

When a BD changes legal form, merges, or is acquired, the successor firm is automatically registered if amendments to Form BD are filed within 30 days of the change.

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 as the BD's legal agent for receiving service of legal process (lawsuits, subpoenas)
• 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• Irrevocable: cannot be withdrawn or canceled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.

Effective Date of Registration

• Registration becomes effective at noon on the 30th day after a complete application is filed
• The Administrator may grant earlier effectiveness or may deny the application before the 30th day
• Key terminology: registration becomes "effective," never "approved"

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 a complete application is filed.

Annual Renewal and Expiration

• All BD registrations expire on December 31 of each year
• Renewal requires filing a renewal application and paying applicable fees
• Registration remains effective while a timely renewal application is pending

Financial Requirements

• 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
• BDs that cannot meet minimum net capital requirements may be required to post a surety 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

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.

Post-Registration Requirements

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
• Maintain records in accordance with SEC Rules 17a-3 (records to be made) and 17a-4 (records to be preserved)