2.4. Practical Application

When Amy Adams was originally hired by the first firm she worked for, she was hired as an agent. Though her firm’s advertisements mentioned wealth management and helping clients see the big picture, Amy’s legal job description was “agent of a broker-dealer.” She initially gave advice as part of helping clients buy and sell different securities, but she was only compensated when they actually completed a transaction.

In short, her job was to go out, find prospective clients, and sell them investments offered through her firm. To be qualified to do this, Amy had to pass a number of licensing exams and give her permission for a background check to be conducted. It was not until after Amy decided to leave the firm that she fully realized that agents cannot remain registered separate from the broker-dealers that employ them.

Suggested Notecards

• What is the basic definition of a broker?

• What is the basic definition of a dealer?

• What does “effect transactions” mean?

• Who is excepted from the definition of a broker-dealer?

• What is an agent of a broker-dealer?

• What is the basic definition of an issuer?

• What are the six general categories of institutional investors?

• How does a customer’s state of residence affect the need for an individual or firm to register as a broker-dealer?

• What are the rules regarding customers and a broker-dealer’s ability to avoid state registration requirements?

• When may Canadian broker-dealers use a limited registration?

• A broker-dealer may only register at the state