Quick Answer
A broker-dealer (BD) effects securities transactions for others or its own account. Agents, issuers, and banks are excluded from the definition. With no place of business in a state, a BD dealing only with institutional clients, or servicing an existing snowbird client, avoids state registration. Registration is effective at noon on the 30th day.
The whole unit on one sheet: who is a broker-dealer, who is not, how they register, and the exclusions the exam loves.
The One-Liners That Win Points
- Broker (agent): matches buyers and sellers, no inventory, earns commissions (agency transactions).
- Dealer (principal): trades from own inventory, earns markups/markdowns plus the bid-ask spread (principal transactions).
- A BD cannot act as broker and dealer in the same transaction; commission AND markup on one trade violates the dual-capacity prohibition.
- Market maker: a dealer standing ready to buy and sell a security continuously at quoted prices; acts as principal, provides liquidity.
- Associated person: any partner, officer, director, branch manager, or employee; excludes purely clerical or ministerial staff.
- Excluded from the BD definition: agents (natural persons), issuers, and banks/savings institutions.
- Firm commitment = underwriter buys the entire issue (acts as dealer); best efforts = agent, unsold returns to issuer (acts as broker).
- No place of business is the gate for both state-registration exclusions.
- Institutional-only exclusion: no office in the state plus clients limited to institutions; one retail client destroys it.
- Snowbird exclusion: no office in the state, servicing an existing client temporarily present who keeps primary residence elsewhere.
- Register through the Central Registration Depository (CRD) via Form BD; withdraw via Form BDW.
Numbers to Lock In
| Item | Value |
|---|---|
| Registration effective | noon on the 30th day after filing |
| All registrations expire | December 31 (annual renewal) |
| Withdrawal effective | 30 days after receipt |
| Administrator jurisdiction after withdrawal | 1 year |
| Snowbird temporary-presence threshold | 30 days or fewer |
Top Gotchas
- Place of business is the pivot: open an office in the state and you must register there, no matter how institutional or existing your clients are.
- Excluded is not exempt: an excluded entity never meets the definition; an exempt entity meets it but is released from registering. Banks are excluded, not exempt.
- Bank holding companies are not automatically excluded; a brokerage subsidiary must register.
- Consent to service of process is filed once at initial registration, never renews, and survives withdrawal or termination.
- A successor firm files its own application, owes no new fees until the next renewal, but must file a new consent to service of process.
- BDs meeting the federal net capital minimum are exempt from the state's separate capital and surety-bond requirements.
- Withdrawal does not end enforcement: the Administrator keeps jurisdiction for a full year on pre-withdrawal conduct.
- Excluded persons are still bound by the antifraud provisions of the Uniform Securities Act.
One-Breath Recap
A broker-dealer effects securities transactions as agent (commissions) or dealer (markups plus the spread), and can never wear both hats in one trade. Agents, issuers, and banks are excluded from the definition, so they never register. State registration is dodged only with no place of business in the state, either serving institutions exclusively or a snowbird existing client temporarily visiting. Register with Form BD through the CRD; registration is effective at noon on the 30th day, expires December 31, and withdrawal leaves the Administrator jurisdiction for one more year.
Need more than the recap? This is a condensed summary. If it is not enough, read the full Broker-Dealer Regulation unit for the complete lesson.