Uniform Securities Agent State Law (Series 63) Practice Exam

What must a broker/dealer do before selling securities in a new state?

1. File a complaint with the SEC

2. Register in that state

3. Get approval from existing clients

4. Conduct a market study of that state

The correct answer is: Register in that state

Before a broker/dealer can sell securities in a new state, it is essential for them to register in that state. This registration process is a requirement under state securities laws, which aim to protect investors by ensuring that firms and their representatives are qualified and subject to regulatory oversight. Registration typically involves submitting a form to the state’s securities regulator, paying a fee, and often providing information about the firm’s business practices, financial condition, and the individuals who will be selling securities in that state. The importance of this registration lies in the regulatory framework that governs securities transactions. Each state has its own set of rules and regulations governing the sale of securities, and registration enables the state to monitor and enforce compliance with these laws. It helps safeguard the interests of investors by ensuring that all entities involved in securities transactions are properly vetted and registered. Other actions like filing a complaint with the SEC, gaining approval from existing clients, or conducting a market study are not requirements for a broker/dealer before selling in a new state under Uniform Securities laws. Therefore, registering in the state is the critical first step that a broker/dealer must take to ensure legal compliance before offering or selling securities in that jurisdiction.