What is a Broker-Dealer? - Davis Polk & Wardwell
What is a Broker-Dealer? - Davis Polk & Wardwell
What is a Broker-Dealer? - Davis Polk & Wardwell
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<strong>What</strong> Is a <strong>Broker</strong>-<strong>Dealer</strong>? § 1A:1.4<br />
contrivance, or fictitious quotations. 32 Exchange Act § 15(c)(7) makes<br />
it unlawful for government securities broker-dealers, bidders for or<br />
purchasers of securities, from knowingly or willfully making any false<br />
or m<strong>is</strong>leading written statement. 33<br />
§ 1A:1.4 State Reg<strong>is</strong>tration Requirements<br />
In addition to the federal regulatory system, broker-dealers are<br />
subject to state securities laws, known as the “Blue Sky Laws.” 34<br />
Most states have adopted the Uniform Securities Act of 1956 (the<br />
“1956 Act”), and more and more states are adopting the Uniform<br />
Securities Act of 2002 (the “2002 Act”). Both the 1956 Act and 2002<br />
Act make it unlawful for any person to transact business in a state as a<br />
broker-dealer or agent 35 unless reg<strong>is</strong>tered with the state’s securities<br />
32. Exchange Act § 15(c).<br />
33. Exchange Act § 15(c)(7).<br />
34. The state laws were given the name of “Blue Sky Laws” to indicate the evil<br />
at which they were aimed, that <strong>is</strong>, speculative schemes which have no<br />
more bas<strong>is</strong> than so many feet of “blue sky.” See Hall v. Geiger-Jones Co.,<br />
242 U.S. 539, 550 (1917). Many state securities laws were in ex<strong>is</strong>tence<br />
before the enactment of the federal securities laws. See THOMAS LEE<br />
HAZEN, THE LAW OF SECURITIES REGULATION 8.1 (4th ed. 2001); J. Parks<br />
Workman, The South Carolina Uniform Securities Act of 2005: A Balancing<br />
Act Under a New Blue Sky, 57 S.C. L. REV. 409 (2006) (citing Hazen)<br />
35. “Agent” <strong>is</strong> defined in the 1956 Act as “any individual other than a brokerdealer<br />
who represents a broker-dealer or <strong>is</strong>suer in effecting or attempting<br />
to effect purchases or sales of securities.” Under the 1956 Act, the term<br />
“Agent” does not include an individual who represents an <strong>is</strong>suer in<br />
(i) effecting transactions in:<br />
• any security (including a revenue obligation) <strong>is</strong>sued or guaranteed by<br />
the United States, any state, any political subdiv<strong>is</strong>ion of a state, or any<br />
agency or corporate or other instrumentality of one or more of the<br />
foregoing; or any certificate of deposit for any of the foregoing;<br />
• any security <strong>is</strong>sued or guaranteed by Canada, any Canadian province,<br />
any political subdiv<strong>is</strong>ion of any such province, any agency or corporate<br />
or other instrumentality of one or more of the foregoing, or any other<br />
foreign government with which the United States currently maintains<br />
diplomatic relations, if the security <strong>is</strong> recognized as a valid obligation<br />
by the <strong>is</strong>suer or guarantor;<br />
• any security <strong>is</strong>sued by and representing an interest in or a debt of, or<br />
guaranteed by, any bank organized under the laws of the United States,<br />
or any bank, savings institution, or trust company organized and<br />
superv<strong>is</strong>ed under the laws of any state;<br />
• a prom<strong>is</strong>sory note, draft, bill of exchange or bankers’ acceptance that<br />
evidences an obligation to pay cash within nine months after the date<br />
of <strong>is</strong>suance, exclusive of days of grace, <strong>is</strong> <strong>is</strong>sued in denominations of at<br />
(<strong>Broker</strong>-<strong>Dealer</strong> Reg., Rel. #9, 9/10)<br />
1A–9