The SEC has recently updated its Guide to Broker-Dealer Registration regarding a variety of new topics, including:

  • Regulation R, which addresses bank brokerage activity and when banks that engage in securities transactions must register as broker-dealers;
  • A broker-dealer’s obligation to recommend only investment strategies that are suitable for their customers and for which the broker-dealer has an “adequate and reasonable basis” for the recommendation;
  • Regulation ATS, which allows broker-dealers to operate automated trading platforms without registering as a national securities exchange or as an exempt exchange; and
  • Broker-dealer privacy policies and practices.

The primary focus of the Guide continues to be determining broker-dealer status. The Securities and Exchange Commission (SEC) requires that brokers and dealers register with the SEC and a self-regulatory organization such as the Financial Industry Regulatory Authority. A broker is generally any entity engaging in transactions in securities for the account of others, whereas a dealer acts as a principal that buys and sells securities for its own account, through a broker or otherwise.