Series 63 practice questionmediumBroker-dealer exclusion for out-of-state firms
ABC Securities is a broker-dealer registered in State J and has no office in State Q. It does business only with two insurance companies and one mutual fund in State Q. Does it have to register as a broker-dealer in State Q under the USA?
- ANo, because it has no office and deals only with institutional clients.✓ Correct answer
- BYes, because it conducts securities business in State Q.
- CYes, because mutual funds are not considered institutional clients.
- DNo, because it is registered in its home state.
Explanation
Why A — No, because it has no office and deals only with institutional clients.
Broker-dealers with no office in the state who do business only with institutional clients are excluded from state registration requirements (USA Sec. 401(c)(2)). Doing business merely in another state or being registered elsewhere does not exempt them if they deal with retail clients.
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