Do broker dealers register with SEC or state?

To commence operations as a broker-dealer in the United States, a comprehensive registration process must be adhered to. This involves submitting an application to two primary regulatory bodies: the Securities and Exchange Commission (SEC) and a Self-Regulatory Organization (SRO), typically the Financial Industry Regulatory Authority (FINRA).

The application to the SEC is filed pursuant to Section 15(b) of the Securities Exchange Act of 1934. This section outlines the specific requirements and procedures for registering as a broker-dealer, ensuring that the applicant meets the necessary qualifications and standards set by the Commission.

The application process is designed to be rigorous and comprehensive, requiring detailed information about the applicant's business operations, financial standing, and compliance history. This includes information on ownership structure, management, and the systems and procedures in place to safeguard customer assets and prevent fraud.

Along with the application, the broker-dealer must also provide financial statements and other supporting documentation to demonstrate its financial stability and viability. These documents are reviewed by the SEC to ensure that the applicant has the necessary resources to conduct its business activities responsibly.

Once the application is submitted, the SEC and the SRO, such as FINRA, will conduct a thorough investigation of the applicant's qualifications and fitness to serve as a broker-dealer. This may include on-site inspections, background checks, and interviews with key personnel.