Although broker-dealers register with both the SEC and the state administrator, the Series 65 tends to focus on the state registration process. For the rest of this broker-dealer registration section, we’ll focus only on the state process and the relevant regulations.
Once a registrant submits all required paperwork and meets the general requirements, the state administrator reviews the application.
These are the important items a broker-dealer must submit:
The state administrator reviews the documentation to decide whether registration will be granted. Here’s what the Uniform Securities Act (USA) says about the timing of that review:
“If no denial order is in effect and no proceeding is pending… registration becomes effective on the 30th day after an application is filed, unless earlier made effective.”
In plain terms, registration becomes effective on the 30th day after the application is filed, as long as there’s no denial order and no pending proceeding. This typically occurs at noon on the 30th day after filing (yes, the test can be that specific). The phrase “unless earlier made effective” means the state administrator can make the registration effective sooner.
Once the state administrator believes registration will be granted, the administrator notifies the applicant (the broker-dealer). The administrator may also require the firm to publish a newspaper announcement about the application. Here’s the exact language from the USA:
“The [Administrator] may by rule or order require an applicant for initial registration to publish an announcement of the application in one or more specified newspapers published in this state.”
Whether the broker-dealer communicates its registration status in a newspaper, online, or verbally to customers, the wording matters. The key term to know is effective registration. Once registration is effective, the broker-dealer may legally do business with customers in that state.
State administrators are especially concerned about firms “playing up” their registration status. Registration does not mean the state administrator approves of the firm or guarantees the performance of any financial professional. For example, regulators would object to a newly registered broker-dealer posting a statement like this:
“Our registration and business has been approved by the state securities administrator, so you know your money is safe with us!”
The Securities and Exchange Commission (SEC) applies a similar idea at the federal level. When a security is registered with the SEC, the issuer (and any firm selling the security) may not imply that the SEC has approved the security.
A helpful way to think about regulators is as referees: they enforce the rules, but they don’t “endorse” the players. Registration is permission to operate legally - it isn’t a stamp of approval.
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