Registration and Post-Registration Requirements

This section covers agent registration requirements, Form U4, effective date of registration, registration expiration, post-registration obligations (Form U4 updates and Form U5), the two-year license lapse rule, dual registration, the agent-versus-IAR comparison, grounds for denial/suspension/revocation, and Administrator authority over agents.

Registration Requirement

• It is unlawful for any person to transact business in a state as an agent unless registered under the Uniform Securities Act (USA) (Section 201(a))
• It is unlawful for any broker-dealer (BD) or issuer to employ an agent unless the agent is registered (Section 201(b))
• Both the agent AND the employing BD/issuer bear responsibility for proper registration

Agent Registration is Employer-Specific

• An agent's registration is not effective during any period when the agent is not associated with a particular registered BD or a particular issuer
• Registration is tied to the specific firm. Changing employers requires new registration
• When an agent begins or terminates a connection with a BD or issuer, all parties (agent, old employer, new employer) must promptly notify the Administrator

Form U4 (Registration)

Form U4 (Uniform Application for Securities Industry Registration or Transfer) is the form used to register an agent with the state Administrator.

• Filed electronically through the CRD (Central Registration Depository) system
• Required disclosures on Form U4:
  • Personal information and residential history
  • Employment history
  • All criminal history (charges and convictions must be disclosed regardless of age)
  • Regulatory actions by any domestic or foreign securities regulator
  • Civil judicial actions
  • Customer complaints, arbitrations, and settlements
  • Financial disclosures (bankruptcies, liens, judgments)
  • Termination details from prior employers

Effective Date of Registration

• If no denial order is in effect and no proceeding is pending, registration becomes effective on the 30th day at noon after the application is filed
• The Administrator may accelerate this and grant registration earlier than the 30th day
• The Administrator may also delay registration by initiating a proceeding to deny the application

Exam Tip: Gotchas

• The 30-day default is a maximum waiting period, not a minimum. The Administrator can make registration effective sooner.
• If the Administrator begins denial proceedings before the 30th day, registration does not become effective until the proceeding is resolved.

Registration Expiration

• Every agent registration expires December 31st unless renewed
• Agents must renew registration annually through the CRD system

Post-Registration: Form U4 Update Obligations

Form U4 must be kept current. Update deadlines depend on the type of event:

Termination and Form U5

When an agent leaves a BD, Form U5 (Uniform Termination Notice for Securities Industry Registration) must be filed:

• Who files: The employer (BD or issuer), not the agent
• Deadline: Within 30 days of the individual's employment end date
• Filed via: CRD
• Contents: Must include reason for termination (voluntary, terminated, permitted to resign, other)

Exam Tip: Gotchas

• Form U5 is filed by the BD firm (not the individual) within 30 days of termination.

Two-Year License Lapse Rule

• A terminated agent must re-register with another firm within 2 years to maintain their state-administered licenses (Series 63, 65, 66)
• On the second anniversary of being unregistered, state-administered licenses lapse
• After lapse, the individual must retake and pass the qualifying exam to re-register

Exam Tip: Gotchas

• The 2-year lapse rule applies to state-administered licenses (Series 63, 65, 66), NOT to Financial Industry Regulatory Authority (FINRA) licenses (Series 7, SIE). FINRA has its own 2-year window for the Series 7, but the SIE does not expire. The exam may test which licenses lapse and which do not.

Dual Registration

• An individual may be dual-registered as both an agent (of a BD) and an investment adviser representative (IAR) (of an investment adviser)
• Dual registration allows an individual to:
  • Execute securities transactions (agent registration)
  • Provide investment advice for compensation (IAR registration)
• Each registration has separate requirements and must be maintained independently
• A BD whose advisory services are solely incidental to its BD business and receives no special compensation for advice is excluded from the investment adviser (IA) definition, but the agent registration still applies

Exam Tip: Gotchas

• An agent who also provides investment advice for a separate fee needs both registrations.
• An agent whose advice is incidental to BD activity and who receives no special compensation does not need IAR registration.

Agent vs. IAR: Side-by-Side Comparison

Exam Tip: Gotchas

• Both agents and IARs file Form U4, and both registrations are employer-specific. The critical difference is WHO they represent and WHAT they do.
• An agent effects transactions; an IAR provides advice. The same individual can hold both registrations simultaneously.

Grounds for Denial, Suspension, or Revocation

The Administrator may deny, suspend, or revoke an agent's registration under USA Section 204 for:

• Filing an application that contains a false or misleading statement of material fact (or omits a material fact)
• Being convicted of a felony or a securities-related misdemeanor within the past 10 years
• Being enjoined by a court from engaging in the securities business
• Being subject to an order of the SEC or another state Administrator denying, suspending, or revoking registration
• Being subject to a final order of a securities regulator of another state
• Engaging in dishonest or unethical business practices
• Being insolvent (unable to meet obligations as they come due)
• Not being qualified on the basis of training, experience, and knowledge
• Having failed to reasonably supervise agents (applies to BD employers)
• Willfully violating the USA or a predecessor act

Exam Tip: Gotchas

• The Administrator cannot deny registration solely because the applicant lacks experience if the applicant is otherwise qualified. The standard is training, experience, AND knowledge; deficiency in one area can be offset by strength in another.
• A felony conviction within 10 years is virtually an automatic bar.

Administrator Authority Over Agents

• The Administrator may require agents to pass a qualifying examination (e.g., Series 63, Series 65, Series 66)
• The Administrator may inspect the books and records of a BD relating to its agents
• The Administrator may issue a cease and desist order if an agent is engaged in violations of the USA
• The Administrator may issue a summary suspension (without a hearing) if the public interest requires it, but must schedule a hearing promptly afterward
• Agents are subject to the antifraud provisions (USA Section 101) regardless of registration status or exemptions

Exam Tip: Gotchas

• There is no exemption from the antifraud provisions. Even if an individual is excluded from the definition of agent and does not need to register, they are still subject to the fraud prohibitions under USA Section 101.
• Fraud provisions apply to ALL persons in ALL securities transactions.