A receptionist accepts a securities order, while a firm's director handles only office leases. State law can treat the receptionist as an agent without treating the director as one.
Before you contact a customer, identify whose securities business you are conducting. A broker-dealer conducts a business buying or selling securities for customers or its own account. An issuer creates or proposes to create a security, such as a company issuing shares to raise money.
An agent is an individual, other than a broker-dealer, who represents a broker-dealer or issuer by carrying out or trying to arrange securities purchases or sales. This is the activity test in §401(b) of the 1956 Uniform Securities Act, as amended. A corporation or partnership can be a broker-dealer, but an agent must be a human being. 1956 Uniform Securities Act, §401
The Act supplies the tested model framework for state securities law. An individual state's enacted provisions control actual practice. For exam problems using the Act, apply its stated definitions and exclusions.
Common mistakes
- Waiting for a completed sale. An unpaid broker-dealer employee who solicits three unsuccessful purchases may already meet §401(b). Zero sales and zero commissions do not settle agent status.
- Counting total purchase dollars. Ten notes total 10 × $10,000 = $100,000, but each denomination remains below the $50,000 threshold. Test the individual paper before applying the issuer exclusion.
- Borrowing another exemption. Selling Treasury bills to only two institutional customers does not itself relieve a broker-dealer salesperson of agent registration. Neither the product nor a customer count below five supplies that result.
Bottom line
- Agent status follows an individual's securities transaction activities for a broker-dealer or issuer, including attempts and order taking.
- Titles, unsuccessful solicitations, and absence of commissions do not determine agent status.
- Registration depends on relevant state business and an effective association with a particular registered broker-dealer or issuer.
- Broker-dealer salespeople receive no general exemption for exempt products, exempt transactions, institutional customers, or five or fewer clients.
Exam shortcut
Circle whom the individual represents before examining the security. An issuer exclusion cannot resolve a broker-dealer salesperson's case. Underline the action verb. “Solicits” and “accepts orders” carry more weight than “assistant,” “director,” or “unpaid.” Label every time period with its job: account age, assignment, customer presence, filing deadline, or application window. For relocation questions, mark both transaction and discovery dates. Select the later date before counting business days.
The full lesson (about 4,538 words, 30 min read) adds 2 worked examples, all 6 common mistakes, a self-check, free in the app.
Learning objectives
- D5
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