Before you accept a customer's order, your firm must determine whether it can conduct securities business in that state. Your registration as a representative and the firm's registration answer separate questions.
The Uniform Securities Act of 1956, as amended, supplies the model state-law framework used here. States enact their own laws based on that framework. The Administrator is the state regulator responsible for administering securities law, including registration.
A broker-dealer (BD) is a person in the business of carrying out securities transactions for customers or for its own account. Under §401(c), either activity is sufficient. A broker handles transactions for others; a dealer conducts securities business using its own account. The combined label does not require both activities. Uniform Securities Act §401(c)
You should read person broadly: it includes an individual or a legal entity, such as a corporation or partnership. An individual operating a securities business can therefore be a broker-dealer. Incorporating the business does not create the registration duty; conducting the covered activity does.
Common mistakes
- Requiring both business models. “Customer transactions plus own-account dealing” is too narrow; either business activity satisfies §401(c).
- Counting retail customers. One, three, or five ordinary resident customers provide no general broker-dealer allowance; test the specific exclusion.
- Inventing a visit deadline. A 30-day, 90-day, or 120-day trip does not decide §401(c)(4)(B); residence and the other conditions do.
Bottom line
- Either customer transactions or dealing for one's own account can establish broker-dealer business; ordinary personal investing alone does not.
- Agents, issuers, banks, savings institutions, and trust companies are excluded from the amended broker-dealer definition.
- The institutional and existing-nonresident-customer exclusions require no in-state place of business; no general five-customer or 15-offer allowance applies.
- Ordinary registration uses Form BD through CRD and generally becomes effective at noon on day 30; it expires December 31 unless renewed.
Exam shortcut
Identify the actor first: firm, bank, issuer, subsidiary, or individual agent. Apply the rule to that legal person. For an out-of-state firm, circle office location before customer type. Then check exclusivity, an existing relationship, residence, and qualifying licensing. When a stem changes one fact, rerun the affected condition. A new office or customer relocation can reverse the answer. Label every date by event: application, amendment, effectiveness, renewal, withdrawal, or enforcement.
The full lesson (about 4,016 words, 27 min read) adds 2 worked examples, all 6 common mistakes, a self-check, free in the app.
Learning objectives
- C3
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