What is a Broker-Dealer? - Davis Polk & Wardwell

§ 1A:2.6 BROKER-DEALER REGULATION
shares purchased under the Plan, Dig-ital proposed to group together
on a daily basis all employee orders to sell and forward such orders to a
Registered Broker-Dealer for execution. 156 Digital would not receive
any compensation for these services and would only perform these
services as a convenience for its employees. 157 In another no-action
letter, the SEC permitted American Transtech to act as transfer agent
to its shareholders in transmitting the shares they wished to sell to a
broker-dealer for execution without registering as a broker-dealer
itself. 158
The SEC staff has indicated reluctance to grant no-action relief to
transfer agents whose proposed services go beyond those that are
merely clerical or ministerial in nature and involve the purchase or
sale of securities, or maintaining custody or possession of funds
or securities at any stage of a securities transaction, 159 and a transfer
agent administering stock plans may be obliged to register under
section 15(a) if it effects securities transactions, absent an available
exemption or exemptive relief. 160
Subject to certain conditions, 161 a bank is not considered a broker
or dealer if it effects transactions, as part of its transfer agency
activities, in the securities of an issuer as part of any employee
pension, retirement, profit-sharing, bonus, or other similar benefits
plans, as part of the issuer’s dividend reinvestment plan, or as part of a
plan or program for the purchase or sale of that issuer’s shares. 162 In
addition, the SEC has, pursuant to its authority under section 15(a)(2)
and section 36 of the Exchange Act, provided a limited conditional
156. See id.
157. See id.
158. American Transtech Inc., SEC No-Action Letter (Sept. 22, 1985).
159. See The Stallion Fund, Inc., SEC Denial of No-Action Request (Oct. 13,
1971); see also Letter from Catherine McGuire, Chief Counsel, Division of
Market Regulation, to Lori Livingston, Transfer Online, Inc. (May 13,
2000).
160. See Order Exempting CIBC Mellon Trust Company From Broker-Dealer
Registration, SEC Release No. 34-60136 (June 18, 2009); Order Exempting
Computershare Trust Company of Canada and Computershare Investor
Services Inc. From Broker Registration, SEC Release No. 34-53667
(Apr. 18, 2006); Transfer Agents Operating Direct Registration System,
SEC Release No. 34-35038 (Dec. 1, 1994).
161. Conditions set forth by section 3(a)(4)(B)(iv) include: (i) the bank does not
solicit transactions or provide investment advice with respect to the
purchase or sale of securities in connection with the plan or program;
and (ii) for dividend reinvestment plans and issuer plans, the bank does
not net shareholders’ buy and sell orders, other than for programs for
add-lot holders or plans registered with the Commission. See Exchange
Act § 3(a)(4)(B)(iv).
162. Id.
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