Broker Dealer Registration Attorneys
Whether your activity requires broker dealer registration, the exemptions and no-action positions that may apply, and the SEC and FINRA applications if it does.
Section 15(a)(1) of the Securities Exchange Act makes it unlawful for a broker or dealer to use interstate commerce to effect transactions in, or to induce or attempt to induce the purchase or sale of, any security unless registered with the Commission. Section 3(a)(4) defines a broker as any person engaged in the business of effecting transactions in securities for the account of others, and section 3(a)(5) defines a dealer as any person engaged in the business of buying and selling securities for its own account. The definitions reach finders, placement agents, platforms, and affiliates that never thought of themselves as brokers.
Industria Business Lawyers advises firms on whether their activity meets the definitions, whether an exemption or no-action position applies, and, where registration is required, on the Commission application under section 15(b) and the FINRA membership application that follows. The status question is answered in writing first, because registering when it is not required is costly and failing to register when it is required is a violation. A consultation is free.
Broker Dealer Questions We Handle
Two statutory definitions, one registration requirement, and a membership application decide the path.
Whether You Are a Broker
Section 3(a)(4)(A) defines a broker as any person engaged in the business of effecting transactions in securities for the account of others. Introducing investors to issuers, negotiating terms, handling funds, and receiving compensation tied to a transaction’s success are the factors that push an intermediary toward the definition. We analyze the activity and the compensation against the statute and the Commission’s published positions.
Whether You Are a Dealer
Section 3(a)(5)(A) defines a dealer as any person engaged in the business of buying and selling securities for the person’s own account, and section 3(a)(5)(B) excludes a person who buys or sells securities for its own account but not as part of a regular business. Trading firms, market makers, and digital asset liquidity providers each raise the question. We determine which side of the trader exception the activity falls on.
Finders and Placement Agents
A person who is paid to introduce investors to a company raising capital is the most common unregistered broker question. Transaction based compensation is a factor that points toward broker status, although it is not determinative by itself and no single factor decides the question. We advise on whether a particular arrangement can be structured outside the definition and, where it cannot, on registration or on working through a registered firm.
The Commission Application
Section 15(b)(1) provides that a broker or dealer registers by filing an application with the Commission in the form the Commission prescribes, and that within forty five days of filing the Commission shall by order grant registration or institute proceedings to determine whether registration should be denied. We prepare the application and the disclosures it requires for the firm and its associated persons.
FINRA Membership
Section 15(b)(8) makes it unlawful for a registered broker or dealer to effect transactions in securities unless it is a member of a registered securities association or effects transactions solely on a national securities exchange of which it is a member. FINRA Rule 1013 sets out the new member application, including the business plan, financial statements and net capital computation, and the supervisory procedures. FINRA Rule 1014 sets the standards for admission and provides that if the Department fails to serve a decision within 180 days of filing, the applicant may request action by the FINRA Board.
Ongoing Obligations After Registration
A registered firm carries net capital, recordkeeping, supervision, reporting, and examination obligations, and its associated persons must be registered and qualified. We build the written supervisory procedures and compliance program the firm needs from the first day of operation. Our Structured & Regulated Finance page covers the adviser, fund, and commodity questions that often sit alongside.
Registration, Exemption, or Restructure
Once the activity meets a definition, there are three paths, and the right one depends on what the business actually needs to do.
Register. The Commission application under section 15(b), followed by FINRA membership under section 15(b)(8) and Rule 1013, together with registration in each state where the firm’s business requires it. This is the path for a firm whose business is intermediating securities transactions and that wants to receive transaction based compensation without restriction.
Rely on an exemption or published position. The statute and the Commission’s rules and staff positions carve out certain activities. Each has conditions that must be met in practice, not only on paper, and reliance should be documented in writing at the time.
Restructure. Some activities can be reorganized so that the definitions are not met, for example by changing how the intermediary is compensated or by conducting the securities activity through a registered firm. This is often the more direct path for a business whose securities activity is incidental to something else.
Digital assets. Where the assets traded are securities, the broker and dealer definitions apply to platforms, market makers, and intermediaries in the same way. Our Exchanges page covers that analysis, and our Investment Adviser Registration page covers the parallel question for advice.
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How We Work a Broker Dealer Registration Matter
What the firm does with securities, for whom, and how it is paid, including any compensation tied to a transaction closing.
The activity against section 3(a)(4) and 3(a)(5), including the dealer trader exception, with the conclusion in writing.
Whether an exemption or published position fits, and whether the activity can be restructured to fall outside the definitions.
The Form BD filing under section 15(b) and the disclosures for the firm and its associated persons.
Form NMA, the business plan, financial statements and net capital computation, supervisory procedures, and the membership interview under Rule 1013.
Written supervisory procedures, registration of associated persons, and the compliance program the firm must maintain.
Ongoing filings, reporting, and preparation for the firm’s first examination.
FAQ
01 • Firms and Intermediaries I get paid a percentage when I introduce an investor to a company. Am I a broker?
Section 3(a)(4) defines a broker as a person engaged in the business of effecting transactions in securities for others. Courts have treated compensation tied to a transaction closing as a factor pointing toward that definition, although no single factor is determinative. Whether a particular arrangement meets it depends on the full set of facts, and it should be analyzed in writing before the next introduction.
02 • Firms and Intermediaries What is the difference between a broker and a dealer?
A broker effects transactions for the account of others under section 3(a)(4). A dealer buys and sells for its own account as part of a regular business under section 3(a)(5), which excludes a person who trades for its own account but not as a business. A firm can be both.
03 • Firms and Intermediaries Do I need to join FINRA as well as register with the SEC?
Section 15(b)(8) makes it unlawful for a registered broker or dealer to effect transactions in securities unless it is a member of a registered securities association or transacts solely on a national securities exchange of which it is a member. For most firms that means FINRA membership under Rule 1013.
04 • Firms and Intermediaries How long does registration take?
Section 15(b)(1) gives the Commission forty five days from filing to grant registration or begin proceedings. FINRA Rule 1014 provides that if the Department has not served a decision within 180 days of filing, the applicant may request action by the FINRA Board. The preparation before filing usually determines how smoothly both run.
05 • Firms and Intermediaries Can a crypto trading platform be a broker or dealer?
If the assets traded are securities, the definitions apply to the platform’s activity in the same way as to any other intermediary. Whether the assets are securities is analyzed first. Where they are not, other regimes, such as the federal and state money transmission rules, may apply instead.
We handle federal matters nationwide and state-law matters in the states where our lawyers are admitted. Where another state’s law applies, we work with local counsel licensed in that state. Call (202) 860-1210 or describe your activity through the form. Free consultation. The line between a finder and a broker is drawn on the facts, and every firm’s activity is analyzed against the statute.
This page provides general information about broker dealer registration under the Securities Exchange Act and FINRA rules and does not constitute legal advice. Reading it does not create an attorney-client relationship with Industria Business Lawyers. Whether a particular firm must register depends on its specific facts and the law in force. Statutes and rules cited are from the Securities Exchange Act of 1934 and the FINRA rulebook.