Overview of Registration and Licensing

Overview of Registration and Licensing

 Forty percent of the Series 63 examination (24 questions) covers registration requirements under the Uniform Securities Act (State law). These include definitions that must be understood in order to know how and to whom state registration requirements apply. Please note that the examination covers these definitions in extreme detail, so they must be memorized. Also, please note that this examination is basically written by securities attorneys - so the questions are extremely legalistic and very picky - so be prepared to endure some painful moments! 

Unless an exemption is available, the Act requires that broker-dealers, agents, investment advisers, and investment adviser representatives be registered in the State. Also note that if these persons were excluded from the definition of a brokerdealer, agent, investment adviser, and investment adviser representative, then registration as such is not required in the State because they do not fall under the definition.

State Blue Sky Laws 

These State registration laws (which also require registration of securities in the State - covered in the next section) are commonly known as "Blue Sky" laws. These laws actually pre-date the adoption of the Federal Securities Acts in 1933 and 1934. At that point in time, the larger States passed their own laws to protect their citizens from stock swindlers who were selling a "piece of the big blue sky." 

National Securities Markets Improvement Act As further background, a federal law, the National Securities Markets Improvement Act of 1996 (NSMIA), was enacted to eliminate duplicate regulations that required registrations at both the Federal and State level. In essence, NSMIA mandated that in certain cases, if registration: is required at the Federal level; then the State cannot require registration as well; and is not required at the Federal level; then the State can require registration. 

Federal Law Supersedes State Law in Most Cases Also, NSMIA made clear that Federal law will supersede State law regarding net capital rules, custody rules, margin rules, financial responsibility rules and recordkeeping rules (all of which are set by the SEC or FRB). Finally, NSMIA requires that if any State law impedes the Federal legislation, Federal law prevails. References to NSMIA are made throughout the text - since it had a major impact on state registration requirements