Broker-dealers normally must register with which entities?

• A. The SEC, the appropriate self-regulatory organization, and any state in which they do business
• B. The SEC only
• C. The state securities regulator only
• D. The Federal Reserve

Answer: (A)

Broker-dealers are regulated on three levels: federal, self-regulatory, and state. At the federal level, they must register with the SEC under the Securities Exchange Act. In addition, they must be a member of the appropriate self-regulatory organization that oversees broker-dealers (for most firms, this is FINRA; the MSRB applies for those dealing with municipal securities). Finally, they must register in each state where they conduct business, with the state securities regulator, to comply with blue-sky laws and protect investors in that jurisdiction. The Federal Reserve is not a general registration authority for broker-dealers. So, the required registrations are with the SEC, the applicable SRO, and the state regulators in states where they do business.