We learned about broker-dealers in the previous section. Broker-dealers are financial institutions that help customers buy and sell securities. Agents are natural persons (human beings) who work for broker-dealers. Agents can also work for issuers. Here’s the legal definition of an agent:
In today’s digital environment, it’s possible for customers to interact with a broker-dealer without ever speaking to an agent. For example, think about investors using Robinhood accounts. Many customers may never have a human-to-human interaction. In those situations, the customer is working directly with the broker-dealer, with no agent involved.
That doesn’t mean agents aren’t needed. Technology can handle many routine transactions, but real-world situations often require a person to step in. Many investors also prefer working with a human when placing trades or asking questions. If you call a broker-dealer for help with a stock trade, you’ll typically be connected with one of its registered agents.
By taking the Series 66 exam, you may later register as an agent in your career. Many Series 66 holders can be dual registered as both agents and investment adviser representatives (IARs). Common roles and responsibilities of agents include general brokerage customer service, transaction support (e.g. explaining what a limit or stop order is), transaction processing (e.g. submitting a stock trade for a customer), relationship management (e.g. point of contact for a broker-dealer’s most profitable clients), back office support (e.g. managing customer files), and supervision of other agents (e.g. acting as a manager for a team of agents).
Agents are most commonly associated with broker-dealers, but employees of some issuers may also be registered as agents. To see why, it helps to review the legal definition of an issuer:
Issuers are organizations that raise capital (money) by selling securities tied to their organizations. Here are a few examples:
Most of the time, issuers “farm out” the responsibility of selling their securities. For example, AirBnB hired Morgan Stanley and Goldman Sachs as co-lead underwriters for their initial public offering (IPO) in December 2020. As a hospitality-based business, it usually wouldn’t make sense for Airbnb to build and maintain an internal department dedicated solely to selling its securities. That would be expensive, and after the IPO the company might not need that team for a long time. For that reason, nearly every issuer (sometimes even including financial institutions) hires a third party to sell its securities.
Still, there are situations where an issuer has its own employees sell its securities. When those employees represent (work for) the issuer in effecting or attempting to effect securities transactions, they must register as agents. In a parallel universe, assume AirBnB created an internal department responsible for selling its stock to the public. Every employee engaging investors in that effort would be required to register as an agent.
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