Wednesday, February 4, 2009

An agent terminates from a broker-dealer

I have been doing the tests; one of the questions is: An agent in the state is fired, who has to notify administrator? Help!!

This is actually easier than it seems.
The question usually goes like this: If an agent is terminated by a broker-dealer in the state and takes a position with another broker-dealer in the state, who must notify the Administrator? Answer: both broker-dealers and the agent. What this means is the broker-dealer from whom he is terminating files a U-5 (which the agent fills out, too), and the new firm fills out a U-4 (which the agent fills out, too.) BTW, you can look at these forms at under "industry and regulatory resources" then "uniform forms."

Here is what the Uniform Securities Act has to say about this topic:
Sec. 201. [REGISTRATION REQUIREMENT.] (a) It is unlawful for any person to transact business in this state as a broker-dealer or agent unless he is registered under this act.
(b) It is unlawful for any broker-dealer or issuer to employ an agent unless the agent is registered. The registration of an agent is not effective during any period when he is not associated with a particular broker-dealer registered under this act or a particular issuer. When an agent begins or terminates a connection with a broker-dealer or issuer, or begins or terminates those activities which make him an agent, the agent as well as the broker-dealer or issuer shall promptly notify the [Administrator].

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