NASAA Series 63Regulation of Broker-Dealers and AgentsMedium
A broker-dealer has no office or employees within State Q and directs all of its transaction activity there exclusively to other registered broker-dealers. Under the Uniform Securities Act, how is this firm treated with respect to registration in State Q?
- AIt is excluded from the definition of broker-dealer in State Q because its only clients there are other broker-dealers
- BIt must register within 15 days of its first transaction in State Q
- CIt must register because it conducts business affecting residents of State Q
- DIt must register but is exempt from paying filing fees
Show answer & explanationAnswer & explanation
Correct answer: A. It is excluded from the definition of broker-dealer in State Q because its only clients there are other broker-dealers
The USA excludes from the broker-dealer definition a firm with no place of business in a state whose only clients there are other broker-dealers, the issuer itself, or certain institutional investors, so no registration is required.
Why the other options are wrong
- B. No registration requirement or deadline applies since the firm is excluded.
- C. This ignores the specific statutory exclusion for BD-to-BD-only activity.
- D. There is no partial registration with fee waiver in this scenario; it's a full exclusion.
No-Place-of-Business BD Exclusion
A broker-dealer with no place of business in a state is excluded from that state's BD definition if its only in-state clients are other broker-dealers, the issuer, or certain institutional investors.
- Exclusion requires no physical office in the state
- Clients must be limited to BDs, issuers, or institutions
- Different from the agent de minimis exemption, which allows some retail clients
Memory trick: No office, only institutions, no need to register.