Broker Dealer Guide
In Wisconsin, a branch office of a broker-dealer is defined as any branch office, sales office or office of supervisory jurisdiction registered under the rules of any national securities exchange or national securities association of which the broker-dealer is a member. ( s. DFI-Sec 1.02(7)(a), Wis. Adm. Code ) TThe definition of branch office for purposes of the FINRA can be found in the FINRA Conduct Rule 3010(g)(2). FINRA Manual Online.
If any location of the broker-dealer meets the definition of branch office, you must file a notice with the Division designating that office location as a branch office. Of significance, FINRA requires that home office locations where sales activity regularly takes place must also be registered with FINRA as a branch office. This means that if there are salespeople who work at the same address as the broker-dealer’s corporate, financial or trading activity facilities, that location must still be separately registered as a branch office. Because the Wisconsin definition of branch office is based on the location being required to be registered with FINRA as a branch office, firms must make filings of those locations as branches in Wisconsin.
Filing of branch office openings, closings and changes of address must be made via the CRD system utilizing Form BR. The filings must still be made within 14 days of the opening, closing or change of address of a branch office. The notice-filing fee for opening a branch office is $80.00 per branch and is collected by the CRD upon filing of Form BR.. (( s. DFI-Sec 4.04(7), Wis. Adm. Code & section 551.614(2), Wis. Stats .) There is no filing fee for changes or closings, other than late fees as described below.
If a change to a branch office filing, whether it be an opening, change of address, or closing, is not filed within the time period prescribed, there will be a delinquent filing fee of $100.00. ( s. DFI-Sec 7.01(6)(d), Wis. Adm. Code ) This is determined by comparing the date of the filing of Form BR with the effective date of the change as noted on the form.
All broker-dealer branch office notices are renewed via CRD along with the firm’s renewal. No paper renewals are permitted. Firms should ensure they open or close branches prior to CRD shutdown in December so all branches are properly renewed. (See Renewal section) The renewal fee is $80.00 for each branch office. ( s. DFI-Sec 4.04(8), Wis. Adm. Code )
Branch Offices & Financial Institutions
Broker-dealer branch offices cannot provide services on the premises of financial institutions where retail deposits are taken unless the broker-dealer complies with the following requirements:
- The services of the broker-dealer are conducted in a physical location that is distinct from where retail deposits are taken. In all situations, the broker-dealer services shall be distinguished from those of the financial institutions, and the name of the broker-dealer shall be clearly displayed where the broker-dealer conducts business.
- Networking and brokerage affiliate arrangements are governed by a written agreement that clarifies the responsibilities of the parties and the compensation arrangements. The agreement must also provide that state securities regulators will be permitted access to the premises where the broker-dealer conducts business to inspect the books and records and sales practices of the broker-dealer.
- At or prior to the time a customer's securities brokerage account is opened, the broker-dealer shall disclose to the customer, orally and in writing, that securities products are not insured by the Federal Deposit Insurance Corporation ("FDIC") or by other deposit insurance required of the financial institution, the securities products are not deposits or other obligations of the financial institution, and are not guaranteed by the financial institution, the securities products are subject to investment risks, including the possible loss of the principal invested.
- Advertisements and sales literature that announce the location of a financial institution where broker-dealer services are provided must disclose the above information.
- All confirmations and account statements must indicate clearly that the broker-dealer provides the brokerage services.
- When filing the branch office notice with the Division, indicate that it is located on the premises of a financial institution and include the identity of the institution.
Broker-dealers Providing Investment Advice
A broker-dealer that provides investment advisory services at a branch office must indicate that information on Form BR. However, you must remember that Form BR questions primarily refer to activities of the applicant and not third party advisers.
In Section 2 of Form BR, when checking the Type of Branch Office Registration, the Investment Adviser box should only be checked if the broker-dealer is also the adviser. This question refers to the type of branch office filing the broker-dealer is making for itself. If there is an affiliated entity that provides the investment advice, but the broker-dealer is not an investment adviser, it cannot file for an investment adviser branch office and therefore, should not check that box.
In Section 3, the first item states: “Indicate the types of financial industry activities conducted by the applicant at this branch. ” Again, this only refers to the broker-dealer and NOT any affiliated or third party advisers. Only if the broker-dealer itself is an investment adviser should the Investment Advisory Services box be checked.
The next item asks about any other investment related services provided at the location. This is where a broker-dealer that is not itself an investment adviser would disclose any “advisory services” provided by another entity.
The third item down asks if personnel at this office will use any names other than the Doing Business As names the broker-dealer has disclosed in Section I of Schedule D of its Form BD. This is where the affiliated or third party investment adviser noted in the item above would be identified. NOTE: even though the broker-dealer may have identified the advisory affiliate in Section V of Schedule D of its Form BD, this does not affect the requirement to disclose the adviser in this Form BR item. Affiliates are not “other names” for purposes of this item.