The US Securities Exchange Act of 1934 (the “Exchange Act”) defines a broker as “any person engaged in the business of effecting transactions in securities for the account of others.” Definition of a dealer covers a person that is “engaged in the business of buying and selling securities for his own account, through a broker or otherwise” but excludes persons who buy or sell securities for their own accounts but not as part of a regular business. Entities as well as individuals may be considered broker-dealers.
Broker-dealer definition is interpreted very broadly. Any intermediaries in securities transactions, with include sales of security tokens, generally, fall within the definition of a broker and must register as a broker with the SEC. They must additionally join a self-regulatory organization (such as FINRA or a registered national securities exchange).
Every alternative trading system (ATS), crowdfunding platform, STO platform or security token issuer will face broker-dealer issues that may require registration of the company or its agents as broker-dealers. The registration process is meticulous, and a registered broker-dealer is subject to numerous due diligence and compliance requirements and obligations.
KSTechLaw attorneys advise on a broad range of broker-dealer registration issues, including:
- Registration as a broker-dealer;
- Possible structures alternative to broker-dealer registration;
- Regulatory compliance of a broker-dealer, including risk assessment, supervisory and reporting requirements.
Our comprehensive broker-dealer registration services include:
- Preparation of FINRA New Member Application (Form NMA);
- Preparation a detailed business plan and other required operational and financial disclosures and procedures;
- Preparation of written supervisory procedures;
- Preparation of AML policies and procedures;
- Training or procurement of a chief compliant officer (COO);
- Preparation for and attending with client the pre-membership interview with FINRA;
- Communications with the SEC;
- Advising on the company’s capitalization;
- Structuring relations with banks;
- State registration and filings in all 50 states plus US territories;
- Preparation of other forms, filings, disclosures and procedures to register an operational broker-dealer.
Resources:
SEC Guide to Broker-Dealer Registration
SEC Exemptions from Broker-Dealer Registration
Registration requirements for Non-Finra Broker Dealers and Salespersons
New York State Broker-Dealer and Securities Registration Information Sheet
California Broker-Dealers, State Investment Advisers and SEC Investment Advisers
Applying for Broker-Dealer Registration in Connecticut
