Market Participants, Intermediaries and Sponsored Individual Responsibilities
This domain tests the registration map and the duties that attach to the individual, not only the firm.
Operator categories
SEC registers broker-dealers, issuing houses, underwriters, registrars, investment advisers, portfolio managers, fund managers, trustees, custodians, clearing and settlement entities, exchanges and the central depository. Each function carries its own capital, personnel and infrastructure requirements.
The sponsored individual
A sponsored individual is a natural person sponsored by a registered operator and registered by SEC to perform a specified function - dealing, advising, portfolio management, compliance, registrarship and similar. Registration is personal and sponsor-specific. Core duties:
- Remain fit and proper: honesty, integrity, competence, solvency, no relevant conviction or bankruptcy.
- Act only within the registered function and the sponsor's licence.
- Complete continuing professional development and pay prescribed fees.
- Notify SEC and the sponsor of material changes; the sponsor must report termination, and registration does not travel with you.
- Cooperate with inspections and answer enquiries truthfully.
Conduct inside the firm
Best execution, no unauthorised trading or churning, prompt allocation, client-asset segregation, conflict disclosure, escalation to the compliance officer.
Worked example
A portfolio manager resigns on Friday and keeps trading for her clients for three weeks while negotiating with a new firm. Reasoning: her registration was tied to the old sponsor and lapsed with that relationship, so the trades are unregistered dealing, exposing her to suspension and the new firm to refusal of registration. Correct sequence: new sponsor applies, SEC registers, then trading resumes.
Traps
Assuming registration is portable between firms; confusing a firm's licence with individual registration; thinking compliance responsibility sits only with the compliance officer.