NASAA Series 63Regulation of Broker-Dealers and AgentsEasy
A broker-dealer located in State X has no office in State Y but wants to conduct business with a pension fund in State Y. The pension fund has assets exceeding $50 million. Under the Uniform Securities Act, must this broker-dealer register in State Y?
- ANo, because the broker-dealer is only conducting business with one client in State Y.
- BYes, because the broker-dealer is soliciting business in State Y.
- CNo, because the pension fund is an institutional client.
- DYes, because the broker-dealer does not have an office in State Y, which is a requirement for exemption.
Show answer & explanationAnswer & explanation
Correct answer: C. No, because the pension fund is an institutional client.
Broker-dealers are typically excluded from the definition of a broker-dealer in a state if they have no place of business in that state and only deal with institutional clients. A pension fund with over $50 million in assets qualifies as an institutional client.
Why the other options are wrong
- A. The number of clients is not the sole factor; the type of client (institutional) is key for this exclusion.
- B. Soliciting business alone does not trigger registration if an exclusion applies.
- D. The absence of an office is a condition for this specific exclusion, not a reason for registration.
BD Institutional Client Exclusion
A broker-dealer is not required to register in a state if it has no place of business in that state and only effects transactions with institutional clients.
- No place of business in the state.
- Clients are exclusively institutional (e.g., banks, insurance companies, large pension plans).
- This is an exclusion from the definition of a broker-dealer, not an exemption from registration.
Memory trick: No office, just big money clients, no registration needed.