Without a license

[CCO]

CCO of a small broker-dealer here. We had a registered rep recently leave the business, and we U-5'd him. However, he still participates in other business activities that may or may not involve the broker-dealer and we are trying to get a handle on what he can and cannot do without any securities licenses. Obviously he cannot effectuate the purchase or sale of securities for clients. There will, however, be times where he will want to interact with such clients. Can he provide securities-related advice to them? Can he solicit new clients for the broker-dealer? Can he discuss the performance of their accounts with the broker-dealer? Keep in mind that he will not be compensated in any way by the broker-dealer for any of these potential activities. Any feedback would be appreciated. We are just trying to get a handle on the boundaries in such a situation.

 

[ShyCat]

U.S. law only.

 

[CCO]

U.S. law only.

This is a U.S. situation. I'm looking for U.S. law answers.

 

[Zigner]

This is a U.S. situation. I'm looking for U.S. law answers.

You have failed to mention the name of your US state twice now.

 

[justalayman]

CCO of a small broker-dealer here. We had a registered rep recently leave the business, and we U-5'd him. However, he still participates in other business activities that may or may not involve the broker-dealer and we are trying to get a handle on what he can and cannot do without any securities licenses. Obviously he cannot effectuate the purchase or sale of securities for clients. There will, however, be times where he will want to interact with such clients. Can he provide securities-related advice to them? Can he solicit new clients for the broker-dealer? Can he discuss the performance of their accounts with the broker-dealer? Keep in mind that he will not be compensated in any way by the broker-dealer for any of these potential activities. Any feedback would be appreciated. We are just trying to get a handle on the boundaries in such a situation.

Without a license he cannot do anything that it requires a license to do. As the CCO this is something you should already have an answer to. If you don't, you need to spend time educating yourself but until then, it would be best if you consulted your company counsel for an answer. Given the seriousness of a violation, getting your answer from an internet forum is far from wise.

 

[CCO]

Without a license he cannot do anything that it requires a license to do. As the CCO this is something you should already have an answer to. If you don't, you need to spend time educating yourself but until then, it would be best if you consulted your company counsel for an answer. Given the seriousness of a violation, getting your answer from an internet forum is far from wise.

The state is CT, and the concept of what activities require a license is far from cut and dried. We've already consulted a couple attorneys. The fact that the individual is receiving no compensation whatsoever clouds the question considerably. I'm certainly not looking for or expecting the official answer on an internet forum, just seeing if there might be some additional insight and/or direction to be found here.

Here is what the SEC has to say, from their website:

"In order to determine whether any of these individuals (or any other person or business) is a broker, we look at the activities that the person or business actually performs. You can find analyses of various activities in the decisions of federal courts and our own no-action and interpretive letters. Here are some of the questions that you should ask to determine whether you are acting as a broker:

Do you participate in important parts of a securities transaction, including solicitation, negotiation, or execution of the transaction?
Does your compensation for participation in the transaction depend upon, or is it related to, the outcome or size of the transaction or deal? Do you receive trailing commissions, such as 12b-1 fees? Do you receive any other transaction-related compensation?
Are you otherwise engaged in the business of effecting or facilitating securities transactions?
Do you handle the securities or funds of others in connection with securities transactions?
A "yes" answer to any of these questions indicates that you may need to register as a broker."

This is wonderfully non-committal.

The above excerpt indicates no-action or interpretive letters or federal court decisions. So yeah, I'm just throwing a line out here to see if anyone reading this has ever come across such a source for guidance on this question.