Broker Dealer Guide
The definition in section 551.102(2), Wis. Stats., states in general that an agent is anyone other than a broker-dealer who represents a broker-dealer or issuer in effecting or attempting to effect transactions in securities. A partner, officer or director of a broker-dealer or issuer, or person occupying a similar status or performing similar functions, is an agent if he or she is within this definition.
Until an application for registration has been approved, either via the CRD system or via letter notification for non-FINRA firm agents, no transactions or solicitations may be made by the applicant in Wisconsin.
Exemption from registration as an agent exist under the following provisions:
- The agent represents a broker-dealer that is exempt from registration under §551.401(2) or (4).
- The agent's only customers in Wisconsin are certain financial institutions or institutional investors as specified in §551.401(2)(a) to (d) and (h), Wis. Stats. and s. DFI-Sec 4.10(1), Wis. Adm. Code.
- The agent’s only customers are federal covered advisers with over $100,000,000 in assets under management trading with written discretionary authority.
- The agent represents a Canadian broker-dealer pursuant to s. DFI-Sec 4.10(4) and s. 551.401(4)(a), Wis. Stats.
- The person’s only duties are clerical or ministerial in nature.
There is no transactional exemption from registration for broker-dealer agents. As defined in s. DFI-Sec 1.02(5)(a) and (c), Wis. Adm. Code, transacting business means effecting or attempting to effect transactions in securities for the account of any person in this state through the US mail, by telephone or by other means from outside or within this state and soliciting any person in this state through the United States, by telephone or by other means from outside or from within this state to become a customer, client or subscriber of the person on whose behalf the soliciting is performed. The form of solicitation includes the Internet and any other electronic means. This means that the use of cold callers or prospectors would usually require those individuals to be registered as securities agents because they may describe the services offered or attempt to qualify the customer by gathering financial or investment history information.
THERE IS NO "UNSOLICITED TRADE" EXEMPTION. Regardless of whether an agent approaches a customer or a person wishing to become a customer contacts an agent with an unsolicited order, the agent cannot open an account, enter an order or conduct any other activity that may be deemed to be transacting business in securities until the agent’s registration application has been approved by the Division. This applies to agents transferring between firms as well unless that agent is eligible for the Temporary Registration program and is not withdrawn from TEMP_REG status by the Division for review.
In Wisconsin, annuities are specifically excluded from the definition of “security” (§551.102(28)(b), Wis. Stats.) and are regulated only by the Wisconsin Office of the Commissioner of Insurance. If a person intends to only offer variable or fixed annuities, that person is required to be registered with FINRA on the national level but not required to be registered as a securities agent in Wisconsin. That person must be licensed as an insurance agent in Wisconsin, however.
The "mobile customer rule" created by the passage of the National Securities Markets Improvement Act allows an agent to effect a transaction for a customer prior to becoming registered in this state only if certain criteria are met. The rule states that if an existing customer moves to Wisconsin but the agent servicing the account is not registered in Wisconsin, that agent may effect a transaction for that customer as long as:
- The broker-dealer the agent represents is registered in Wisconsin:
- the customer must have a business-client relationship with the
broker-dealer for at least 30 days prior to the transaction, as well
as a relationship with the agent at least 14 days prior to the transaction:
- the agent must also have been registered in the customer's previous
state of residence for at least 30 consecutive days during the last
- the agent must file an application to become registered in Wisconsin within 10 days of the transaction or the date when it was first known that the customer had moved to another state.
Once the agent applies for registration the agent may effect transactions prior to registration within either 60 days of the date of application or until the State notifies the agent that the application has been denied, whichever occurs first.
When a broker-dealer agent changes firms and utilizes the Temporary
Registration program, whereby an agent’s registration transfers
on the same day if certain conditions are met, CRD will reflect a status
of TEMP_REG. This status means the registration has transferred to the
new firm and the agent is approved to begin conducting business at that
new firm immediately. The Division has 30 days to review that person’s
record and, if it has concerns with immediate approval of the application,
it can reset the agent’s status to PENDING. The Division will notify
the broker-dealer that the agent has been reset to PENDING and the broker-dealer
must advise the agent that no Wisconsin business can be conducted, including
solicitation to transfer customer accounts to the new firm, until the
Division has changed the status to APPROVED.
If there are no concerns or when the examiner has completed review of responses to requests for more detail on disclosure items, the examiner will change the status to APPROVED.
The granting of a registration authorizes the agent to only offer and sell securities based on the product knowledge examinations the agent has passed. For example, an applicant who has passed the Series 7 General Securities Representative exam can sell nearly all types of securities. However, an agent who has only passed the Series 6 Investment Company Representative exam can only sell investment company products (mutual funds), REITs and unit investment trusts. Variable annuities are not securities in Wisconsin, but are regulated by the Wisconsin Office of the Commissioner of Insurance.
Passing an examination does not automatically mean you are registered. There is no such thing as a "Series 7 registration." The registration is a securities agent registration and the extent of your business activities is determined by your having passed product knowledge and state law examinations. Every applicant must pass the state law examination (Series 63 or 66) in addition to a product knowledge exam in order to be approved as a securities agent.
You cannot conduct any business in Wisconsin until your registration has been approved by the Division, except as noted above.
Every individual seeking to become registered as an agent must pass the examinations prescribed in section DFI-Sec 4.01(3), Wis. Adm. Code. These examinations are either the Series 63 Uniform Securities Agent State Law examination or the Series 66 Uniform Combined State Law Examination, and at least one of the securities business or product examinations noted in that section.
Series 7 General Securities Representative Examination
Series 6 Investment Company Products/Variable Contracts Representative Examination.
Series 22 Direct Participation Programs Representative Examination.
Series 52 Municipal Securities Representative Examination.
Series 62 Corporate Securities Limited Representative Examination.
Series 42 Registered Options Representative Examination.
Series 72 Government Securities Representative Examination.
Series 82 Private Placement Representative Examination.
There are waivers from the examination requirement if:
- the applicant has passed an above required exam within 2 years prior to the date the application for registration was filed in this state,
- the pplicant has been registered within 2 years prior to the date the application is filed in this state, as an agent or a broker-dealer under the securities law of another state as long as the other state where the applicant was registered required the Series 63 examination prior to that 2 year period and they have been registered with FINRA within that 2 year period for the product exam qualification required for the current registration,
- the applicant has submitted an undertaking satisfactory to the Division setting forth how the applicant's activities will be limited in this state and, in the case of an agent seeking a limited registration, how the agent will be adequately supervised,
- the applicant has been registered under ch. 551 Wis. Stats., as an agent or broker-dealer within 2 years prior to the date the application is filed to engage in the type of business the applicant is applying for registration,
- the applicant is currently registered and in good standing with The Securities and Futures Authority of Great Britain and has passed the Series 17 Modified General Securities Representative Qualification Examination for United Kingdom Representatives as well as the Series 63 or 66,
- the applicant is currently registered and in good standing as an agent with any Canadian stock exchange or with a securities regulator of any Canadian province or territory, or with the Investment Dealers Association of Canada and has passed either the Series 37 or Series 38 Canada modules of the Series 7 General Securities Representative Qualification Examination as well as the Series 63 or 66,
- the applicant has received an order of the Division, issued under conditions as the Division may prescribe, waiving the requirement to take and pass one or more of the examinations.
FINRA administers all examinations at their computer testing sites and reservations to take the exams are made either by filing Form U4 or Form U10 with FINRA along with submitting the appropriate fees through your broker-dealer. The Division will not "sponsor" or otherwise authorize FINRA to permit an individual to take an exam prior to the filing of an application for registration with the Division. However, the Series 63 and 66 exams may be taken without a broker-dealer sponsor or state authorization by filing Form U10 directly with FINRA.
The Division does not have forms nor does it have any information or scheduling ability with regard to these examinations. All inquiries should be directed to FINRA at 301-590-6500. Study guides for the Series 63 and 66 exams are available on the North American Securities Administrators Association (“NASAA”) website at www.nasaa.org under Exams or you can contact NASAA at 750 First Street, N.E., Suite 1140, Washington, DC 20002 or call (202) 737-0900.
There are a number of private organizations that offer classroom or self-study courses for the exams. A list of these providers is available on the NASAA website at http://www.nasaa.org/industry-resources/exams/study-material-vendors/ These vendors are not endorsed, recommended or rated by the Division or NASAA.
Filing an Application
Applications for registration as a securities agent are accomplished by the broker-dealer completing a copy of Form U4 and submitting that application electronically to the Division via the CRD if the firm is a FINRA member. If the employing firm is not a FINRA member, a paper copy of the form is sent directly to the Division along with the $80 registration fee.
Wisconsin DOES NOT require fingerprint cards or agent “come clean” letters.
When the application has been received via the CRD, any applicant who does not have a disciplinary history will generally be automatically approved. The Division will manually review applicants with disciplinary items on their application. More information regarding a reported disclosure may be requested prior to an approval. If the agent or the firm fails to respond to a request for more information, the Division may request the application be withdrawn or seek an order of denial of the registration application.
Approval notice is made only via the CRD; no paper registrations are
issued. Broker-dealer agents must keep their applications current by
updating their U4 via the CRD whenever the information in the application,
including residential addresses, becomes outdated. Failure to maintain
an accurate application may result in action against the agent's registration.
Unlike insurance agents, broker-dealer agents only have a registration when they are employed by a registered broker-dealer. If the agent terminates employment with the broker-dealer, they no longer have a securities agent registration. The person then has 2 years to become reregistered with another broker-dealer in order to keep their exam qualifications active. After 2 years have passed with no new registration being granted, the exams become inactive and the person will be required to retake and pass the exams should the person later become employed by a broker-dealer again.
Securities agent registrations expire concurrently with the broker-dealer's registration on December 31st. Renewal of securities agent registrations is accomplished as part of the annual renewal sent to broker-dealers by the CRD system in October. (See the Broker-Dealer Renewal section). Withdrawals for securities agents who terminate their employment for any reason must be filed within 30 calendar days of termination. See s. DFI-Sec 4.08(2), Wis. Adm. Code.
Wisconsin law prohibits an agent from simultaneously representing more than one broker-dealer or issuer or a combination of both unless certain conditions are met. Section 551.402(5) and (6), Wis. Stats.
If the broker-dealers are affiliated by direct or indirect common control, there are no special filings needed. For example, if the two broker-dealers are owned by or under the control of a parent company, the agent may be registered for both firms with no special requirements. In these instances, the broker-dealer should make its normal U4 filing for the agent. However, if the CRD should show the applicant's status as Deficient Dual, the application will not appear in our approval queue. The firm should notify the Division, either by letter or email, that there is an application pending and provide the applicant's name and CRD number. We can search that individual's record and, if no other deficiencies or concerns exist, we can manually approve the applicant for the additional broker-dealer. If we are not notified of a pending application, it may remain in deficient status until brought to our attention.
Section 551.402(5) and (6), Wis. Stats. and s. DFI-Sec 4.01(8), Wis. Adm. Code, provide a mechanism for manual review of an application to represent two or more broker-dealers that are unaffiliated. In the few instances we have reviewed, the agent will represent firms that are limited product firms. For example, an agent who works for a mutual fund-only firm may be approached by a firm that only does direct participation programs. Because the agent could not offer the same products for both firms, the staff will consider an application for dual registration.
Form ASIM(WI) (PDF: 28 KB / 2 pages) is the Simultaneous Agent Registration Application. Each broker-dealer the agent will represent must complete this form. On the form, an authorized official of the broker-dealer will acknowledge the dual representation by the agent, note any restrictions it will place on the agent's activities at its firm, and attest that a written disclosure will be provided to each customer not later than the date of receipt of the confirmation for the first securities transaction for the account of the customer effectuated by the agent after simultaneous registration of the agent is approved by the Administrator. A copy of the proposed written disclosure must be included with the application. The disclosure document must clearly identify all broker-dealers the agent is representing and the restrictions placed upon the agent. The agent must also clearly identify to customers which firm the agent is representing when discussing securities with the customer.
The broker-dealer should submit the regular U4 application and fee for the agent via the CRD and all broker-dealers involved must submit their ASIM(WI) (PDF: 28 KB / 2 pages) forms and disclosure documents directly to the Division. The ASIM(WI) (PDF: 28 KB / 2 pages) must be signed by both an authorized signatory of the broker-dealer as well as the agent.
The staff will review the applications and other materials and make a determination on approval. If the application is approved, the approval will be noticed via the CRD in the usual manner, plus a copy of the ASIM(WI) (PDF: 28 KB / 2 pages) showing the approval date will be returned to the broker-dealers' signatories.
These dual approvals are valid only while the applications all remain
active. Should an agent withdraw with one broker-dealer, the dual approval
terminates. If the agent wishes to again be dually registered, the dual
registration process begins anew, with all new forms and applications.
As a policy, the staff has not generally approved dual applications if the broker-dealers each provide the same types of securities. For example, we will not likely approve an agent with two general securities firms. We are concerned that it would be difficult for customers to determine which firm the agent was representing in such instances, and likewise more difficult for the agent to be sure any recommendations are the most appropriate and have the best execution given the securities available from both firms.
Questions on broker-dealer and agent registration can be directed to an Examiner at (608) 266-2139.
Updated May 1, 2010