NASAA Series 63Regulation of Broker-Dealers and AgentsMedium
A broker-dealer registered in State A wants to conduct business in State B. The Administrator of State B requires the broker-dealer to file an application, consent to service of process, and pay a filing fee. What additional requirement is typically mandated for broker-dealers to maintain their registration in State B?
- ASubmit quarterly profit and loss statements to the Administrator.
- BMaintain a minimum number of branch offices in State B.
- CMaintain minimum net capital requirements.
- DEmploy only agents who are residents of State B.
Show answer & explanationAnswer & explanation
Correct answer: C. Maintain minimum net capital requirements.
Broker-dealers are typically required to meet and maintain minimum net capital requirements as a condition of registration to ensure their financial solvency and ability to meet obligations to clients.
Why the other options are wrong
- A. While financial statements are filed, quarterly profit and loss statements might not be a universal 'additional requirement' in the same vein as net capital.
- B. There's no general requirement for a minimum number of branch offices in every state of registration.
- D. Agents can be residents of any state as long as they are properly registered in the state where they conduct business.
BD Minimum Net Capital
Broker-dealers must meet and maintain minimum net capital requirements as established by state Administrators to ensure financial stability and protect investors.
- A crucial financial safeguard for clients.
- Administrator sets the specific amount.
- Failure to maintain can lead to suspension or revocation of registration.
Memory trick: Registration is just the start; keep your capital, records, and supervision in order.