Statutory Exclusions from BD & Agent Definitions
Reviews statutory exclusions from the definition of broker-dealer and agent, including commercial banks, issuer representatives in exempt transactions, and clerical staff.
- Commercial banks, savings institutions, trust companies, issuers, and agents are statutorily excluded from being broker-dealers.
- Clerical and ministerial employees who do not solicit or take orders are excluded from being agents.
- Individuals representing ISSUERS in exempt securities (govts, munis) or exempt transactions (institutional sales) are NOT agents.
The Uniform Securities Act carves out critical exclusions from both broker-dealer and agent definitions.
Entities excluded from the definition of a broker-dealer include: (1) agents, (2) issuers, (3) commercial banks, savings institutions, and trust companies, and (4) out-of-state firms with no place of business in the state whose only clients are institutional investors or vacationing clients.
Individuals excluded from the definition of an agent include: (1) clerical or administrative employees who perform purely ministerial tasks without taking orders or discussing investment merits, (2) individuals representing issuers in transactions involving specified exempt securities (U.S. govts, munis, Canadian govts, banks, commercial paper), (3) individuals representing issuers in exempt transactions (e.g. sales to institutional buyers), and (4) individuals representing issuers selling to existing employees where no commissions are paid.
- Commercial bank subsidiaries selling mutual funds are NOT banks; bank-affiliated brokerage subsidiaries must register as broker-dealers.
- An individual representing a BROKER-DEALER selling municipal bonds is ALWAYS an agent; the issuer exemption applies ONLY to issuer reps.
The Chief Financial Officer (CFO) of the City of Philadelphia represents the city in issuing $50 million of general obligation municipal bonds to institutional and retail investors. The CFO receives her regular municipal salary and receives no transaction-based compensation or sales commission. Is the CFO required to register as an agent under the Uniform Securities Act?