Individuals must file Form U-4 to apply for registration as an agent. Form U-4 includes the required criminal, legal, and regulatory disclosures, and the application must include the appropriate filing fee. In addition, a consent to service of process must be submitted with the initial application (it doesn’t need to be re-submitted later). Depending on the broker-dealer’s scope of operations and the requirements of a particular state, a surety bond may also need to be posted on the agent’s behalf.
The processing timeline for agent registration is the same as it is for broker-dealers. If all required documentation has been submitted, registration becomes effective at noon on the 30th day after filing. The state administrator may choose to accelerate the process and make registration effective in fewer than 30 days.
Once registered, agents (and other registered persons) may not state that they were “approved” by the state administrator.
Unlike broker-dealers, agents are not subject to minimum financial requirements (there’s no minimum net capital requirement). Even though agents don’t have to maintain a specific asset level, all agents (and applicants) must disclose certain financial events, such as bankruptcy or compromises with creditors. An agent’s application for registration may also be denied due to insolvency.
Insolvency or bankruptcy doesn’t automatically prevent registration. The administrator typically evaluates these situations case by case. If the applicant is actively addressing their financial issues, the administrator will often grant effective registration.
Registered agents must update the state administrator by filing a Form U-4 amendment whenever any material information on the form changes, including:
*Only customer complaints involving accusations of theft or resulting in large settlements must be reported.
Most updates must be filed within 30 days of the event. However, statutory disqualification events must be updated on Form U-4 within 10 days.
Canadian agents may obtain limited registration through their Canadian broker-dealers. The rules and process discussed previously apply to agents in the same way. However, an agent is not required to be a member of a Canadian self-regulatory organization (SRO) or a stock exchange.
As long as an agent remains in good standing and renews registration annually (by December 31st), they may continue to operate legally in a state. Eventually, an agent’s registration will end - for example, due to retirement, a job change, a career change, or being fired. In regulatory terms, these situations are all treated as an agent’s termination, and the state administrator must be notified so the agent’s registration can be canceled.
Both the broker-dealer and the agent are responsible for notifying the state administrator when the agent’s employment ends. This is done by filing Form U-5. The agent and a firm supervisor sign the form and submit it to the appropriate state administrator(s).
If an agent leaves one broker-dealer and joins another, all three parties must notify the appropriate state administrator(s). The agent and the former broker-dealer complete, sign, and submit Form U-5. The agent and the new broker-dealer complete, sign, and submit Form U-4.
When a termination occurs, the state administrator must be notified “promptly,” which generally means within 30 days of the event.
Termination doesn’t necessarily mean the employee was fired. For example, an agent might take a sabbatical or other temporary leave of absence and terminate their registration during that period.
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