Definition of an Agent of a Broker-Dealer
This section covers the defining elements of agent status, the natural-persons-only rule, the distinction between agents and investment adviser representatives (IARs), who is and is not an agent, exclusions from the agent definition, and the partner/officer/director rule.
Defining Elements
An agent is any individual (natural person), not the firm itself, who represents a broker-dealer (BD) or issuer in effecting or attempting to effect purchases or sales of securities. Three elements define agent status:
- Natural person only: agents are always individuals; no entity (corporation, LLC, partnership) can be an agent
- Represents a BD or issuer: acts on behalf of another party, not for their own account
- Effecting OR attempting to effect: registration is required even if no trade is ever completed; attempting to solicit a trade triggers the definition
Exam Tip: Gotchas
- The term "agent" under the Uniform Securities Act (USA) refers exclusively to individuals who represent broker-dealers or issuers in securities transactions. It does NOT refer to investment adviser representatives (IARs).
- An IAR who only provides advice is not an "agent" unless they also represent a BD in effecting transactions.
Natural Person Requirement
| Entity Type | Can Be Agent? | Why |
|---|---|---|
| Individual (human) | Yes | Natural person |
| Corporation | No | Legal entity, not natural person |
| Partnership | No | Legal entity |
| LLC | No | Legal entity |
The Partner, Officer, or Director Rule
A partner, officer, or director of a BD or issuer is an agent only if they otherwise come within the definition, meaning they effect or attempt to effect securities transactions.
- A BD officer who handles only administrative duties is not an agent
- The same officer who begins personally soliciting clients or executing trades becomes an agent and must register
Who IS an Agent
- Registered representatives (stockbrokers) at a BD
- A person cold-calling prospects to solicit securities purchases
- An officer of an issuer who sells the issuer's own securities in a non-exempt (public) transaction
- An independent contractor effecting securities transactions on behalf of a BD
Exclusions from the Agent Definition
Certain individuals are NOT agents and do not require agent registration. These exclusions apply primarily to individuals representing issuers, not broker-dealers.
Issuer Representative Exclusions
| Exclusion | Details |
|---|---|
| Exempt securities transactions | Individual represents an issuer in transactions involving securities exempted under Uniform Securities Act (USA) Section 402(a) (e.g., government securities, bank securities, listed securities) |
| Exempt transactions | Individual represents an issuer in transactions exempted under USA Section 402(b) (e.g., isolated non-issuer transactions, institutional investor transactions) |
| Federal covered securities | Individual represents an issuer in transactions involving covered securities under Securities Act of 1933 Section 18(b)(3) and 18(b)(4)(D) (e.g., NYSE/Nasdaq-listed securities, certain Regulation D offerings) |
| Issuer employee transactions (no commission) | Individual represents an issuer in transactions with existing employees, partners, or directors of the issuer, provided no commission or other remuneration is paid or given directly or indirectly for soliciting any person in the state |
Broker-Dealer Representative Exclusion
- Individuals representing a broker-dealer are excluded from the agent definition if their transactions are limited to those described in Securities Exchange Act of 1934 (SEA) Section 15(h)(2) (certain clerical or ministerial functions)
Exam Tip: Gotchas
- The "no commission" exclusion for issuer employees is very narrow. If any form of commission or remuneration is paid for soliciting, the individual must register as an agent. Even indirect compensation (e.g., bonuses tied to the number of employees who participate) can trigger registration.
- Exclusions from the agent definition apply primarily to individuals representing issuers, not broker-dealers. An individual who represents a BD and effects securities transactions must generally register as an agent regardless of the type of security involved.