Except when it doesn't. If it's offered and sold through an exempt transaction, then the security would not have to be registered in the typical manner. For example, if the issuer offers the investment to only 10 persons in the state, or offers it only to institutional investors, registration of the security is not required. And, if the individual in the test question represents the ISSUER of an exempt security, or represents the ISSUER in an exempt transaction, that individual does not have to register.
But, if the individual represents a broker-dealer by selling any securities, that individual has to register in any state where he has a place of business or any non-institutional clients. That seems to imply that the agent does not have to register in order to work with institutions, but that is not correct. The agent has to register with FINRA through the member firm to sell securities to any customer. Also, he has to register with every state in which he has a place of business or any non-institutional customers. If he has a place of business in New York and wants to open an account for a retail customer in Indiana, he has to be registered in Indiana. He would not have to register if he had no place of business in Indiana and the only customers there were institutions. No need for the additional registration in Indiana in that case, but that doesn't mean the agent doesn't have to be registered anywhere. Right?
If a broker-dealer has a place of business in Arkansas, they must register there. Period. If they want to serve retail customers in Louisiana, they have to register with Louisiana. If all their customers were institutions in Louisiana and the firm had no place of business there, no registration would be required by the state of Louisiana. No additional registration required in that case.
So, as always, read the questions carefully and think through them analytically. Also, hang onto the big concepts below:
- If an agent represents a broker-dealer, he has to register, period
- If an agent or broker-dealer has a place of business in the state, they have to register in the state
- If an agent or broker-dealer have no place of business in the state and no non-institutional customers, they do not have to register in that state