Chapter 2: Regulation of Broker-Dealers
This chapter covers 12% of the Series 63 exam (approximately 7 questions) and focuses on how broker-dealers are defined, registered, and supervised under state securities law.
What You'll Learn
| Unit | Topic | Key Concepts |
|---|---|---|
| 1 | Broker-Dealer Definition and Registration | BD definition, registration process, Form BD, denial/revocation/suspension, successor firms |
| 2 | Broker-Dealer Exemptions and Supervision | Exclusions from BD definition, post-registration requirements, supervisory systems, failure to supervise |
Why This Chapter Matters
Broker-dealers are the firms through which securities are bought and sold. The exam tests whether you understand who qualifies as a broker-dealer, what triggers the registration requirement, who is excluded, and what supervisory obligations apply after registration.
This chapter moves from definition to registration to ongoing obligations, the same lifecycle pattern you'll see repeated for agents (Chapter 3), advisers (Chapter 4), and securities (Chapter 5).
Exam Strategy
At 12% of the exam, this is a mid-weight section. Key areas to master:
- BD definition: The distinction between brokers (agents for others) and dealers (trading for their own account)
- Exclusions: Know which entities are excluded from the BD definition (issuers, certain banks, agents)
- Registration process: Form BD, effective dates, withdrawal
- Supervisory obligations: Written supervisory procedures, annual compliance reviews, the consequence of failure to supervise
Think of it this way: If Chapter 1 taught you the language, this chapter teaches you the first set of registration rules. The pattern you learn here (definition -> registration -> exemptions -> ongoing duties) repeats throughout the exam.