An agent is registered in State A. A client of this agent moves from State A to State B. The client contacts the agent in State A and places an unsolicited order for a security. The agent effects the transaction. Which of the following statements is TRUE regarding this scenario under the Uniform Securities Act?
- AThe agent can effect the transaction for up to 30 days without registering in State B.
- BThe agent must be registered in State B because the client resides there.
- CThe agent can effect the transaction without registering in State B due to the unsolicited order.
- DThe agent has committed a violation by effecting a transaction for a client in State B without registration.
Show answer & explanationAnswer & explanation
Correct answer: D. The agent has committed a violation by effecting a transaction for a client in State B without registration.
An agent must be registered in any state where they solicit or effect transactions, even for existing clients who move. An unsolicited order does not create an exemption from agent registration in the client's new state of residence. The 'temporary client' exemption typically applies to a client moving from another state where the agent is registered, but the agent still needs to pursue registration in the new state within a short period.
Why the other options are wrong
- A. A temporary registration exemption exists for clients moving, but it requires the agent to be properly registered in the 'old' state and to pursue registration in the 'new' state, typically allowing a limited time to do so. This question implies no such pursuit is happening.
- B. While the agent needs to be registered, the unsolicited order itself doesn't automatically trigger registration; the act of effecting the transaction in State B does.
- C. The unsolicited order exemption is for the security, not for the agent's registration status in a new state.
Agent Registration - Moved Client
An agent must be registered in the state where a client resides to effect transactions, even if the order is unsolicited. A limited temporary exemption may exist if the client moves and the agent promptly pursues registration in the new state.
- Agent registration is tied to the client's residence for effecting transactions.
- Unsolicited orders do not exempt an agent from registration in a new state.
- A temporary exemption may allow transactions for a client moving to a new state if the agent is actively pursuing registration there.
Memory trick: A client's new state is the 'Agent's New Zone' – registration must follow, unsolicited or not.