Broker-Dealer Basics: A Guide to Registration and Compliance


Registering as a broker-dealer is a complex but necessary process for firms looking to buy and sell securities or provide investment advice. 

This guide will provide a comprehensive overview of broker-dealer registration, walking through the key steps, requirements, and common pitfalls. 

Whether you’re just starting out or looking to expand an existing business, understanding the broker-dealer registration process is crucial.

An Overview of Broker-Dealer Registration

Under the Securities Exchange Act, the vast majority of firms acting as brokers or dealers are required to register with the SEC and join a self-regulatory organization like FINRA. This involves filing the necessary paperwork, meeting qualification requirements, joining an SRO, and adhering to strict conduct regulations.

While there are some exemptions from registration, most companies buying and selling securities as a business must go through the broker-dealer registration process. Even firms dealing in private securities or M&A transactions often fall under the broker-dealer definition.

Navigating the legal complexities of registration requires knowledge. However, working with the right broker-dealer law firm can make the process straightforward.

Who is a Broker Dealer?

A person or company that purchases and sells securities for their own account or on behalf of clients is known as a broker-dealer. Broker-dealers play a crucial role in facilitating transactions in the securities markets.

The SEC uses a broad definition for broker-dealers. Simply put, a broker brings buyers and sellers together and gets compensated for this service. A dealer buys and sells securities for its own inventory. A firm acting as both a broker and dealer must register with the SEC as a broker-dealer.

Who Needs to Register as a Broker-Dealer?

The Securities Exchange Act defines a “broker” as any person engaged in the business of effecting transactions in securities for others. A “dealer” acts as a principal by buying and selling securities for their own account.

Some common examples of brokers and dealers include:

  • Investment advisory firms
  • Private placement agents
  • Fund managers
  • Event-driven hedge funds
  • Real estate brokers selling TIC interests
  • Merger and acquisition advisors
  • Angel investors
  • Finders
  • And more

While there are exceptions that we’ll cover, most firms acting as brokers or dealers need to register unless they only deal with government securities, municipal securities, commercial paper, or certain exempt securities.

Broker-Dealer Registration Process

Registering as a broker-dealer involves multiple key steps:

Submit Form BD

Form BD provides information about the broker-dealer’s business, owners, finances, and disciplinary history. It must be filed electronically through the Central Registration Depository (CRD) and FINRA’s Entitlement Program.

The SEC must approve the completed Form BD before the firm can operate as a broker-dealer. It usually takes 45-60 days to get the green light.

Become a Member of an SRO

Broker-dealers must join a self-regulatory organization (SRO) like FINRA or a national securities exchange. This is submitted as part of Form BD. SRO membership provides oversight and regulation of member broker-dealers.


The Securities Investor Protection Corporation (SIPC) protects clients if a broker-dealer shuts down due to bankruptcy or other financial troubles. SIPC membership is mandatory and provides up to $500,000 of coverage per client.

Comply with State Requirements

Every state has its own registration, licensing, and bond requirements for broker-dealers operating in that jurisdiction. The firm must identify and complete all state-level registrations.

Pass Required Qualification Exams

Individuals associated with or representing the broker-dealer must pass qualification exams like the Series 7 or Series 63 to conduct securities business.

Develop Compliance Infrastructure

Registered broker-dealers must establish and maintain compliance policies, procedures, and controls to adhere to SEC and SRO rules. This includes designating compliance staff.

Common Broker-Dealer Registration Mistakes

Firms new to the securities business often make preventable mistakes in the registration process, leading to delays or costly problems down the road. 

Here are some of the most common missteps we see:

  • Not fully understanding when broker-dealer registration is required. Some assume exemptions apply when they do not.
  • Failure to properly register associated persons involved in the securities business. Many miss supplemental exams or licensing.
  • Incomplete state registrations. Broker-dealers often miss less visible states or don’t meet individual state capital requirements.
  • Net capital rule violations. Maintaining the required liquid assets as a cushion against losses trips up new firms.
  • Inadequate policies and procedures. Robust, documented compliance processes must support registrations.
  • SRO membership issues. Delayed FINRA membership can leave firms in violation of SEC registrations.

Without guidance, these kinds of mistakes can jeopardize a broker-dealer registration and create significant liabilities.

How An Experienced Law Firm Can Help

The attorneys at My RIA Lawyer have deep experience guiding broker-dealers through successful registrations on the first attempt.

Their broker-dealer registration services leverage extensive experience to efficiently guide financial services firms through complex state and SEC registration processes to achieve fully compliant broker-dealer status.

Contact their team today to schedule a consultation and get your broker-dealer registration on the fast track.

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