Regulation of Broker-Dealers, Agents, Investment Advisers, and Investment Adviser Representatives
Who must register
A broker-dealer (BD) is any person engaged in the business of effecting securities transactions for its own account or for the accounts of others. An agent is the individual who represents a BD or an issuer in effecting those transactions. An investment adviser (IA) is any person who, for compensation, engages in the business of advising others as to securities, including financial planning and consulting whenever securities advice is part of the service. An investment adviser representative (IAR) is the individual who acts for the adviser.
Mechanics
Firms file Form BD or Form ADV; individuals file Form U4 through the firm. Registration is required in a state when the firm has a place of business there and when the individual has clients who reside there. The model Uniform Securities Act also gives a narrow de minimis exemption for a firm with no place of business in the state whose in-state client base is tiny (five or fewer during the preceding twelve months) - but the exemption evaporates the moment a place of business exists.
Federal covered advisers
NSMIA preempts state registration of SEC-registered advisers. States may still demand a notice filing, a consent to service of process, and fees, and they keep full anti-fraud and enforcement authority over those advisers and their representatives.
Traps
A registration is tied to one firm and is not transferable to a new employer. Registration follows the client's residence, not the agent's location. "Place of business" includes any location where the agent regularly holds out to the public.
Worked example: An agent and BD registered in State A take an unsolicited order from a client who moved to State B two months ago. Both the agent and the firm must be registered in State B unless a specific exemption fits - the move is not grandfathered by the prior relationship.