Ready to launch your broker-dealer firm in 2025? The first step is registration.
But knowing where to start and what to do when it comes to the process of registration is often easier said than done. To help our audience take the leap, we’ve gathered the steps and highlighted the key aspects of broker-dealer registration, so you can rest assured you’ve got everything covered.
In this post, we cover what steps most broker-dealer firms and registered representatives (RRs) must complete to properly register with the Financial Industry Regulatory Authority (FINRA), the Securities and Exchange Commission (SEC), and states.
Broker-Dealer Registration 101
There are numerous steps firms must complete to register. This highlights just a few items.
Registering your broker-dealer firm and its registered representatives involves these key steps, in no particular order:
Set up the Super Account Administrator or SAA
The SAA has control over all applications in the Entitlement Program for the organization. SAA’s at firms with more than one user are required to complete an annual online FINRA Entitlement Account Certification of all accounts.
In order for a broker-dealer to begin business, it must file a Form BD, which “asks questions about the background of the broker-dealer and its principals, controlling persons, and employees. The broker-dealer must meet the statutory requirements to engage in a business that involves high professional standards, and quite often includes the more rigorous responsibilities of a fiduciary.”
Following the filing, the SEC will grant registration with 45 days or begin the process of denying.
Complete a New Member Application
FINRA Rule 100 Series and FINRA Rule 1014 govern the firm broker-dealer registration process. Under those rules, each broker-dealer firm must complete a New Member Application (NMA) and meet certain member standards. The NMA is rigorous, including a comprehensive review of your firm’s detailed business plan, supervisory procedures, and financial statements.
After FINRA deems your NMA to be “substantially complete,” FINRA is required to render a decision on the application within 180 days.
Pass Series Exams
FINRA Rule 1120 outlines the various functions and responsibilities of a representative and principal at a broker-dealer firm. Principals must pass the Series 24 exam.
Additionally, any individual at your firm who will be responsible for preparing and managing the books and recordkeeping at your firm must pass the Series 27 exam. These individuals are usually broker-dealers, RRs, or compliance professionals.
Register Each Representative or Principal at Your Broker-Dealer Firm
FINRA Rule 1120 outlines the various functions and responsibilities of a representative and principal at a broker-dealer firm. Your firm must determine which members meet what descriptions and have each of them register with FINRA.
Registrations and filings can be completed and tracked via FINRA Gateway.
The Form U4, which is filed via FINRA Gateway, establishes the registration of representatives of broker-dealers, investment advisers or issuers of securities [who] must be registered with the appropriate jurisdictions and/or self-regulatory organizations (SROs).”
Form U4 is:
- This form collects information about the individual RR and principal, including employment and disciplinary history, etc.
- State-Specific Registration Forms: Individual states may have additional requirements for broker-dealer registration.
Additional Form Filings
- Form ADV (if applicable): If the broker-dealer firm also provides investment advisory services, it may need to register as an investment adviser and submit Form ADV to the SEC or state securities regulators.
- Form BR: This form collects information about the broker-dealer firm’s location and the operation of branch offices. This form is used to register branch offices of the broker-dealer with FINRA and relevant states.
Join the Securities Investor Protection Corporation
“Every registered broker-dealer must be a member of the Securities Investor Protection Corporation, or SIPC, unless its principal business is conducted outside of the United States or consists exclusively of the sale or distribution of investment company shares, variable annuities, or insurance. Each SIPC member must pay an annual fee to SIPC. SIPC insures that its members’ customers receive back their cash and securities in the event of a member’s liquidation, up to $500,000 per customer for cash and securities.”
Note: Additional state requirements will be dependent upon the states within which the broker-dealer is doing business.
Maintaining Good Standing as a Broker-Dealer Firm
One of the primary reasons registrations is such a thorough process is to ensure that broker-dealer firms are set to best serve investors, protecting their interest and their trust in the industry. After registering, broker-dealer firms must maintain a good standing with regulators with a few key steps:
- Designating a Chief Compliance Officer.
- Developing an efficient compliance program which also includes maintaining your WSPs.
- Continued education.
Broker-Dealer Registration and Licensing with COMPLY
Registering your broker-dealer firm can be a cumbersome process, but you don’t have to go it alone.
Say goodbye to hours spent gathering and sorting through confusing paperwork, and say hello to:
- Proper fulfillment of all compliance requirements, ensuring that your firm meets all regulatory registration standards
- Information and document organization on our behalf and with your collaboration.
- A liaison between you and the regulator examiner to review the application and response to any requests for additional information and documentation, so you can focus on other value-adding tasks.
Ready to register your broker-dealer firm? Schedule time to speak with an expert today!