Chapter DFI-Sec 4

Chapter DFI-Sec 4

REGISTRATION OF BROKER-DEALERS AND AGENTS

DFI-Sec 4.01   Registration procedure.

DFI-Sec 4.02   Net capital requirements and aggregate indebtedness limitations.

DFI-Sec 4.03   Broker-dealers’ records.

DFI-Sec 4.04   Reporting requirements.

DFI-Sec 4.05   Practice rules.

DFI-Sec 4.06   Prohibited conduct.

DFI-Sec 4.07   Registration period.

DFI-Sec 4.08   Withdrawal of registrations.

DFI-Sec 4.09   Denial, suspension, revocation and censure.

DFI-Sec 4.10   Registration exemptions.

Ch. DFI-Sec 4 Note Note: Chapter SEC 4 as it existed on December 31, 1977 was repealed and a new chapter SEC 4 was created effective January 1, 1978. Chapter SEC 4 was renumbered chapter DFI-Sec 4 under s. 13.93 (2m) (b) 1., Stats., and corrections made under s. 13.93 (2m) (b) 6. and 7., Stats., Register, December, 1996, No. 492.

DFI-Sec 4.01 DFI-Sec 4.01 Registration procedure.

DFI-Sec 4.01(1) (1) 

DFI-Sec 4.01(1)(a) (a) Applications for initial and renewal registrations of broker-dealers and agents, as well as amendments, reports, notices, related filings and fees, shall be filed with:

DFI-Sec 4.01(1)(a)1. 1. The division on forms prescribed by the division in s. DFI-Sec 9.01 (1); or

DFI-Sec 4.01(1)(a)2. 2. The central registration depository of the financial industry regulatory authority as developed under contract with the North American securities administrators association, on forms established for the central registration depository.

DFI-Sec 4.01(1)(b) (b) An application for registration as an agent of a broker-dealer is deemed filed under s. 551.406 (1), Stats., on the “FILING DATE” reflected on the records of the central registration depository.

DFI-Sec 4.01(2) (2) 

DFI-Sec 4.01(2)(a) (a) Except as provided in par. (b), an “application” for purposes of s. 551.406 (1), Stats., means all information required by the form prescribed under sub. (1) together with any additional information required by the division.

DFI-Sec 4.01(2)(b) (b) An application for initial registration or for renewal of a registration as a broker-dealer registered with the financial industry regulatory authority includes the payment of the Wisconsin broker-dealer registration fee and, in the case of an initial application, the examination fee prescribed by s. DFI-Sec 7.01 (3) (a), to the central registration depository of the financial industry regulatory authority. An application for initial registration as a broker-dealer under this paragraph shall be deemed filed under s. 551.406 (1), Stats., on the date the application is transferred from “NO STATUS” to “PENDING” on the records of the central registration depository. An application for renewal of a registration as a broker-dealer under this paragraph shall be deemed filed under s. 551.406 (1), Stats., when the fee on deposit with the central registration depository has been allocated to the division.

DFI-Sec 4.01(2)(c) (c) An “application” for initial registration or for renewal of a registration as a securities agent for a broker-dealer registered with the financial industry regulatory authority includes the payment of Wisconsin agent registration fees to the central registration depository. An application for initial registration as an agent under this paragraph shall be deemed “filed” under s. 551.406 (1), Stats., on the date when the application is designated ready for approval on the records of the central registration depository. An application for renewal of a registration as an agent under this paragraph shall be deemed “filed” under s. 551.406 (1), Stats., when the fee on deposit with the central registration depository has been allocated to the division.

DFI-Sec 4.01(2)(d) (d) An electronic signature affixed to any filing made in compliance with the requirements of the central registration depository shall constitute irrefutable evidence of legal signature by any individual whose name is typed on the filing.

DFI-Sec 4.01(3) (3) Unless waived under sub. (4), each applicant for an initial registration as a broker-dealer or agent is required to take and pass within the two year period immediately preceding the “FILING DATE” of the application reflected on the records of the central registration depository, either the Series 63 Uniform Securities Agent State Law Examination or the Series 66 Uniform Combined State Law Examination, and take and pass within the two year period immediately preceding the “FILING DATE” of the application reflected on the records of the central registration depository, or receive a waiver from passing, the general securities business examinations in par. (a), unless the applicant’s proposed securities activities will be restricted, in which case the applicant is required to take and pass, or receive a waiver from passing, each examination in pars. (b) to (h) that relates to the applicant’s proposed securities activities:

DFI-Sec 4.01(3)(a) (a) The Series 7 General Securities Representative Examination.

DFI-Sec 4.01(3)(b) (b) The Series 6 Investment Company Products/Variable Contracts Representative Examination.

DFI-Sec 4.01(3)(c) (c) The Series 22 Direct Participation Programs Representative Examination.

DFI-Sec 4.01(3)(d) (d) The Series 52 Municipal Securities Representative Examination.

DFI-Sec 4.01(3)(e) (e) The Series 62 Corporate Securities Limited Representative Examination.

DFI-Sec 4.01(3)(f) (f) The Series 42 Registered Options Representative Examination.

DFI-Sec 4.01(3)(g) (g) The Series 72 Government Securities Representative Examination.

DFI-Sec 4.01(3)(h) (h) The Series 82 Private Placement Representative Examination.

DFI-Sec 4.01(4) (4) The examination requirement in sub. (3) is waived for any applicant who meets the criteria set forth in any one of the paragraphs in this subsection:

DFI-Sec 4.01(4)(a) (a) The applicant has passed the examinations required to be passed by the applicant under sub. (3) within 2 years prior to the date the application for registration is filed in this state.

DFI-Sec 4.01(4)(b) (b) The applicant has been registered within 2 years prior to the date the application is filed in this state, as an agent or as a broker-dealer under the securities law of another state and the following applicable conditions are met:

DFI-Sec 4.01(4)(b)1. 1. The other state where the applicant has been registered has required the uniform securities agent state law examination prior to that 2 year period.

DFI-Sec 4.01(4)(b)2. 2. In the case of examinations required by sub. (3) (a) to (e), the applicant has been registered with the financial industry regulatory authority to engage in the type of business for which the applicant is applying for registration within 2 years prior to the date of filing of the application for registration.

DFI-Sec 4.01(4)(c) (c) The applicant has submitted an undertaking satisfactory to the division setting forth how the applicant’s activities will be limited in this state and, in the case of an agent seeking a limited registration, how the agent will be adequately supervised.

DFI-Sec 4.01(4)(d) (d) The applicant has been registered under ch. 551, Stats., within 2 years prior to the date the application is filed as an agent or broker-dealer to engage in the type of business for which the applicant is applying for registration.

DFI-Sec 4.01(4)(e) (e) The applicant is currently registered and in good standing with The Securities and Futures Authority of Great Britain and has passed the Series 17 Modified General Securities Representative Qualification Examination for United Kingdom Representatives, and either the Series 63 Uniform Securities Agent State Law Examination or the Series 66 Uniform Combined State Law Examination, except that the applicant’s activities may not include the offer and sale of municipal Securities unless the applicant passes the examination listed in sub. (3) (d).

DFI-Sec 4.01(4)(f) (f) The applicant is currently registered and in good standing as an agent with any Canadian stock exchange or with a securities regulator of any Canadian province or territory, or with the Investment Dealers Association of Canada and has passed either the Series 37 or Series 38 Canada modules of the Series 7 general securities representative qualification examination, and either the Series 63 Uniform Securities Agent State Law Examination or the Series 66 Uniform Combined State Law Examination, except that the applicant’s activities may not include the offer and sale of municipal securities unless the applicant passes the examination listed in sub. (3) (d).

DFI-Sec 4.01(4)(h) (h) The applicant has received an order of the division, issued under conditions as the division may prescribe, waiving the requirement to take and pass one or more of the examinations in sub. (3).

DFI-Sec 4.01(5) (5) Any application for registration which is not completed or withdrawn within 6 months from the date it is initially received may be deemed materially incomplete, and the division may issue an order denying the registration.

DFI-Sec 4.01(6) (6) 

DFI-Sec 4.01(6)(a) (a) Pursuant to s. 551.406 (3) (b), Stats., the effective date of a registration application is deferred until noon on the 45th day after the filing of any amendment completing the application, unless the application otherwise becomes effective under s. 551.406 (3) (a), Stats.

DFI-Sec 4.01(6)(b) (b) For purposes of s. 551.406 (3) (b), Stats., a written request for additional information is not limited to a request to the applicant or the applicant’s employing broker-dealer, and the division may request additional information from third-party sources relevant to the review of the application.

DFI-Sec 4.01(6)(c) (c) Before action on an application, the division may designate an employee to make an examination of the books, records and affairs of the applicant at the applicant’s expense.

DFI-Sec 4.01(7) (7) A securities agent registration is effective to authorize the licensee [registrant] to effectuate transactions only in the types of categories of securities that the licensee [registrant] has been qualified to sell by passing the examinations specified in sub. (3).

DFI-Sec 4.01 Note Note: The correct word is shown in brackets.

DFI-Sec 4.01(8) (8) For an agent to simultaneously represent in this state more than one broker-dealer pursuant to s. 551.402 (5), Stats., or an issuer pursuant to s. 551.402 (6), Stats., the following requirements shall be met, in addition to the regular agent registration requirements:

DFI-Sec 4.01(8)(a) (a) Each broker-dealer or issuer that the agent represents shall sign on a form designated by the division in s. DFI-Sec 9.01 (1) (b), a written grant of permission to the agent to represent the other employers. The written grant of permission shall include the identity of all other securities employment affiliations of the agent and contain a listing of all restrictions on the agent’s securities activities imposed by the agent’s employers.

DFI-Sec 4.01(8)(b) (b) The agent shall sign on the form under par. (a), an acknowledgement and verification of the information required under that paragraph.

DFI-Sec 4.01(8)(c) (c) The manually signed original of the form under par. (a) shall be filed with the division together with a written application, which may be in letter form, on behalf of the agent to simultaneously represent more than one broker-dealer or issuer. The division shall approve the application in writing prior to the agent’s transacting securities business while simultaneously representing more than one broker-dealer or issuer.

DFI-Sec 4.01(8)(d) (d) Written disclosure shall be provided regarding the agent’s simultaneous representation of more than one broker-dealer or issuer, including the information in par. (a), to each securities customer of the agent not later than the date of receipt of the confirmation for the first securities transaction for the account of the customer by the agent after dual registration is approved by the division.

DFI-Sec 4.01 History History: Cr. Register, December, 1977, No. 264, eff. 1-1-78; am. (1), Register, December, 1979, No. 288, eff. 1-1-80; am. (1) and (4) (b), r. (4) (c), renum. (4) (d) and (e) to be (4) (c) and (d), r. and recr. (5), renum. (7) to be SEC 4.05 (8), Register, December, 1980, No. 300, eff. 1-1-81; am. (1) and (3), Register, December, 1981, No. 312, eff. 1-1-82; am. (3), (5) and (6), r. (4) (a), renum. (4) (b) to (d) to be (4) (a) to (c), Register, December, 1982, No. 324, eff. 1-1-83; am. (1) (a), renum. (2) to be (2) (a) and am., cr. (2) (b) and (7), r. and recr. (3), (4) and (5), Register, December, 1983, No. 336, eff. 1-1-84; cr. (8), Register, December, 1985, No. 360, eff. 1-1-86; am. (2) (b), Register, December, 1986, No. 372, eff. 1-1-87; am. (3) (intro.) and cr. (3) (e) and (9), Register, December, 1988, No. 396, eff. 1-1-89, except (9), eff. 2-1-89; renum. (2) (b) to (2) (c), cr. (2) (b), am. (4) (b), Register, December, 1990, No. 420, eff. 1-1-91; am. (4) (b) and (5) (intro.), cr. (10), Register, December, 1992, No. 444, eff. 1-1-93; r. and recr. (4) (b), am. (5) (intro.), Register, December, No. 468, eff. 1-1-95; am. (3) (intro.) and (5) (intro.), renum. (4) (e) to be (4) (f), cr. (4) (e), Register, December, 1995, No. 480, eff. 1-1-96; r. and recr. (3) (a), am. (3) (b) to (e) and (5) (a) to (d), cr. (3) (f) and (g), (4) (f) and (g) and (5) (e), renum. (4) (f) to be (4) (h), Register, December, 1999, No. 528, eff. 1-1-00; CR 01-082: am. (3) (intro.), cr. (3) (h), r. (5), renum. (6) to (10) to be (5) to (9), Register December 2001 No. 552 eff. 1-1-02; CR 08-077: am. (title), (2), (3) (intro.), (a), (4) (a) to (d), (5), (7), (8) (intro.) and (d), renum. (1) to be (1) (a) and am. (1) (a) (intro.) and 2., cr. (1) (b) and (2) (d), r. and recr. (6), r. (9) Register December 2008 No. 636, eff. 1-1-09; CR 09-056: am. (3) (intro.) and (4) (e) to (g) Register December 2009 No. 648, eff. 1-1-10; CR 10-062: r. (4) (g) Register September 2010 No. 657, eff. 10-1-10.

DFI-Sec 4.02 DFI-Sec 4.02 Net capital requirements and aggregate indebtedness limitations.

DFI-Sec 4.02(1) (1) Every broker-dealer, whether or not subject to rule 15c3-1 of the securities exchange act of 1934, shall maintain net capital in such minimum amounts as are designated in that rule for the activities to be engaged in by the broker-dealer in this state.

DFI-Sec 4.02(2) (2) The aggregate indebtedness of each broker-dealer to all other persons shall not exceed the levels prescribed under rule 15c3-1 of the securities exchange act of 1934.

DFI-Sec 4.02(3) (3) If a broker-dealer is an individual, the person shall segregate from personal capital an amount sufficient to satisfy the net capital requirement, and the amount so segregated shall be utilized solely for the business for which the broker-dealer is registered.

DFI-Sec 4.02(4) (4) The division may by order exempt any broker-dealer from the provisions of this subsection, either unconditionally or upon specified conditions, if by reason of the broker-dealer’s membership on a national securities exchange or the special nature of its business and its financial position, and the safeguards that have been established for the protection of customers’ funds and securities, the provisions are not necessary in the public interest or for the protection of investors.

DFI-Sec 4.02 History History: Cr. Register, December, 1977, No. 264, eff. 1-1-78; am. (3) and (4), Register, December, 1980, No. 300, eff. 1-1-81; am. (1), Register, December, 1982, No. 324, eff. 1-1-83; am. (1), Register, December, 1983, No. 336, eff. 1-1-84; CR 08-077: am. (3) Register December 2008 No. 636, eff. 1-1-09.

DFI-Sec 4.03 DFI-Sec 4.03 Broker-dealers’ records.

DFI-Sec 4.03(1) (1) Every registered broker-dealer shall prepare and keep current at its principal office the books and records as described in rules 17a-3 and 17a-4 under the securities exchange act of 1934.

DFI-Sec 4.03(2) (2) Every registered broker-dealer shall preserve the records required under sub. (1) according to the schedule provided in rule 17a-4 under the securities exchange act of 1934 in compliance with the requirements of the U.S. securities and exchange commission concerning preservation and microfilming of records or other means of retention of records.

DFI-Sec 4.03(3) (3) Every branch office of a registered broker-dealer, as defined under s. DFI-Sec 1.02 (7), shall prepare and keep current the branch office books and records as described in rule 17a-3(f) under the securities exchange act of 1934.

DFI-Sec 4.03(4) (4) Every registered broker-dealer shall preserve the branch office records required under sub. (3) according to the schedule provided in rule 17a-4(k) under the securities exchange act of 1934 in compliance with the requirements of the U.S. securities and exchange commission concerning preservation and microfilming of records or other means of retention of records.

DFI-Sec 4.03(5) (5) This section does not require a registered broker-dealer to make and keep such records of transactions cleared for the licensee [registrant] by another broker-dealer as are customarily made and kept by the clearing broker-dealer.

DFI-Sec 4.03(6) (6) The division may by order exempt any broker-dealer from all or part of the requirements of this section, either unconditionally or upon specified conditions, if by reason of the special nature of its business, the division finds the issuance of the order is necessary or appropriate in the public interest or for the protection of investors.

DFI-Sec 4.03 History History: Cr. Register, December, 1977, No. 264, eff. 1-1-78; am. (3) (intro) and cr. (3) (d), Register, September, 1978, No. 273, eff. 10-1-78; r. and recr. (1) (p), Register, December, 1979, No. 288, eff. 1-1-80; am. (1) (c), (d) 4., (e), (j), (k), (2), (3) (intro.), (a) and (b), (4) to (6), r. and recr. (1) (l), renum. (1) (m) to (p) to be (1) (n) to (q), (3) (c) and (d) to be (3) (d) and (e) and am., cr. (1) (r) and (3) (c), (1) (s) renum. from SEC 4.05 (9), Register, December, 1980, No. 300, eff. 1-1-81; am. (1) (r) and (4), Register, December, 1981, No. 312, eff. 1-1-82; r. (1) (s), am. (2), (3) (a) and (e), Register, December, 1982, No. 324, eff. 1-1-83; am. (1) (b) and (2), Register, December, 1983, No. 336, eff. 1-1-84; am. (1) (r), (2) and (4), Register, December, 1984, No. 348, eff. 1-1-85; am. (1) (r), Register, December, 1985, No. 360, eff. 1-1-86; am. (2), Register, December, 1986, No. 372, eff. 1-1-87; am. (1) (intro.) and cr. (1) (s), Register, December, 1987, No. 384, eff. 1-1-88; am. (1) (j), Register, December, 1989, No. 408, eff. 1-1-90; am. (3) (intro.), Register, December, 1991, No. 432, eff. 1-1-92; am. (1) (intro.), (r) 2., (2) and (3) (e), Register, December, 1992, No. 444, eff. 1-1-93; renum. (2) to (2) (a) and am., cr. (2) (b), Register, December, 1994, No. 468, eff. 1-1-95; am. (3) (c), renum. (6) to be (7), cr. (6), Register, December, 1995, No. 480, eff. 1-1-96; am (1) (j), Register, December, 2000, No. 540, eff. 1-1-01; correction in (1) (p) made under s. 13.93 (2m) (b) 7., Stats., Register August 2002 No. 560; CR 03-068: r. and recr. (1) to (4), r. (6), renum. (7) to be (6) Register November 2003 No. 575, eff. 12-1-2003; CR 08-077: am. (1) to (5) Register December 2008 No. 636, eff. 1-1-09; correction in (3) made under s. 13.92 (4) (b) 7., Stats., Register December 2008 No. 636.

DFI-Sec 4.04 DFI-Sec 4.04 Reporting requirements.

DFI-Sec 4.04(1) (1) 

DFI-Sec 4.04(1)(a) (a) Except as provided in pars. (b) and (c), each broker-dealer shall file annually with the division within 60 days from the end of its fiscal year a copy of its annual financial statement in the form specified in rule 17a-5 under the securities exchange act of 1934, accompanied by a computation of its net capital using the formula specified in rule 15c3-1 under the securities exchange act of 1934.

DFI-Sec 4.04(1)(b) (b) The filing requirement in par. (a) is not applicable to any broker-dealer registered under the securities exchange act of 1934 if the broker-dealer is not delinquent in the filing of its annual financial statements with the U.S. securities and exchange commission under rule 17a-5 of the securities exchange act of 1934.

DFI-Sec 4.04(1)(c) (c) The deadline established under par. (a) for a broker-dealer to file its annual financial statement shall be extended for an additional 30 days upon the broker-dealer filing with the division before the deadline date, a written request for an additional 30 days to file its annual financial statement.

DFI-Sec 4.04(2) (2) Each broker-dealer shall file with the division a copy of every complaint or equivalent pleading related to its business, transactions, or operations in this state, naming the broker-dealer or any of its partners, officers or agents as defendants in any civil or criminal proceeding, or in any administrative or disciplinary proceeding by any public or private regulatory agency, within 20 days of the date the complaint or equivalent pleading is served on the broker-dealer, or the broker-dealer otherwise receives notice thereof; a copy of every answer or reply thereto within 10 days of the date it is filed; and a copy of the decision, order, or sanction made with respect to the proceeding within 20 days of the date the decision, order, or sanction is rendered.

DFI-Sec 4.04(3) (3) Except as provided in subs. (2) and (8), each broker-dealer shall file with the division any notice of change of control or change of name, as well as any material change in the information included in the broker-dealer’s most recent application for registration, in an amendment to Form BD filed with the central registration depository within 30 days of the date of the change.

DFI-Sec 4.04(4) (4) Every broker-dealer shall file with the division the following reports concerning its net capital and aggregate indebtedness:

DFI-Sec 4.04(4)(a) (a) Immediate electronic or written notice whenever the net capital of the broker-dealer is less than is required under s. DFI-Sec 4.02 (1), specifying the respective amounts of its net capital and aggregate indebtedness on the date of the notice;

DFI-Sec 4.04(4)(b) (b) A copy of every report or notice required to be filed by the broker-dealer pursuant to rule 17a-11 under the securities exchange act of 1934, contemporaneous with the date of filing with the U.S. securities and exchange commission.