ARTICLE 4 – BROKER-DEALERS, AGENTS, INVESTMENT ADVISERS, INVESTMENT ADVISER REPRESENTATIVES, AND FEDERAL COVERED INVESTMENT ADVISERS

§401.  BROKER-DEALER REGISTRATION REQUIREMENT AND EXEMPTIONS.   SEQ CHAPTER \h \r 1(a) [Registration requirement.]  It is unlawful for a person to transact business in this State as a broker-dealer unless the person is registered under this [Act] as a broker-dealer or is exempt from registration as a broker-dealer under subsection (b) or (d).

RCW 21.20.040  Registration and notification required – Exemptions.

(1) It is unlawful for any person to transact business in this state as a broker-dealer or salesperson, unless:

(a) The person is registered under this chapter;

(b) the person is exempted from registration as a broker-dealer or salesperson to sell or resell condominium units sold in conjunction with an investment contract as may be provided by rule or order of the director as to persons who are licensed pursuant to the provisions of chapter 18.85 RCW;

§ 21.  BROKER-DEALER REGISTRATION REQUIREMENT AND EXEMPTIONS. 

   (1) Registration requirement.  It is unlawful for a person to transact business in this state as a broker-dealer unless the person is registered under this chapter as a broker-dealer or is exempt from registration as a broker-dealer under subsection (2) or (4) of this section.

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(b) [Exemptions from registration.] The following persons are exempt from the registration requirement of subsection (a):

§ 21(2).  Exemptions from registration.  The following persons are exempt from the registration requirement of subsection (1) of this section:

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  (1) a broker-dealer without a place of business in this State if its only transactions effected in this State are with:

(A) the issuer of the securities involved in the transactions;

(B) a broker-dealer registered as a broker-dealer under this [Act] or not required to be registered as a broker-dealer under this [Act];

(C) an institutional investor;

(D) a nonaffiliated federal covered investment adviser with investments under management in excess of $100,000,000 acting for the account of others pursuant to discretionary authority in a signed record;

(E) a bona fide preexisting customer whose principal place of residence is not in this State and the person is registered as a broker-dealer under the Securities Exchange Act of 1934 or not required to be registered under the Securities Exchange Act of 1934 and is registered under the securities act of the State in which the customer maintains a principal place of residence;

(c) the person is a salesperson who satisfies the requirements of section 15(h)(2) of the Securities Exchange Act of 1934 and effects in this state no transactions other than those described by section 15(h)(3) of the Securities Exchange Act of 1934;

(d) the person is a salesperson effecting transactions in open-end investment company securities sold at net asset value without any sales charges; or

(e) the person participates only in the sale or offering for sale of variable contracts which fund corporate plans meeting the requirements for qualification under section 401 or 403 of the United States Internal Revenue Code as set forth in RCW 48.18A.060

§ 21(2)(a).  A broker-dealer without a place of business in this state if its only transactions effected in this state are with:

   (i) The issuer of the securities involved in the transactions;

   (ii) A broker-dealer registered as a broker-dealer under this chapter or not required to be registered as a broker-dealer under this chapter;

   (iii) An institutional investor;

   (iv) A nonaffiliated federal covered investment adviser with investments under management in excess of one hundred million dollars acting for the account of others pursuant to discretionary authority in a signed record;

   (v) A bona fide preexisting customer whose principal place of residence is not in this state and the person is registered as a broker-dealer under the Securities Exchange Act of 1934 or not required to be registered under the Securities Exchange Act of 1934 and is registered under the securities act of the state in which the customer maintains a principal place of residence;

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     (F) a bona fide preexisting customer whose principal place of residence is in this State but was not present in this State when the customer relationship was established, if:

(i) the broker-dealer is registered under the Securities Exchange Act of 1934 or not required to be registered under the Securities Exchange Act of 1934 and is registered under the securities laws of the State in which the customer relationship was established and where the customer had maintained a principal place of residence; and

(ii) within 45 days after the customer’s first transaction in this State, the person files an application for registration as a broker-dealer in this State and a further transaction is not effected more than 75 days after the date on which the application is filed, or, if earlier, the date on which the administrator notifies the person that the administrator has denied the application for registration or has stayed the pendency of the application for good cause;

§ 21(2)(a)(vi). A bona fide preexisting customer whose principal place of residence is in this state but was not present in this state when the customer relationship was established, if:

(A) The broker-dealer is registered under the Securities Exchange Act of 1934 or not required to be registered under the Securities Exchange Act of 1934 and is registered under the securities laws of the state in which the customer relationship was established and where the customer had maintained a principal place of residence; and

(B) Within forty-five days after the customer's first transaction in this state, the person files an application for registration as a broker-dealer in this state and a further transaction is not effected more than seventy-five days after the date on which the application is filed, or, if earlier, the date on which the director notifies the person that the director has denied the application for registration or has stayed the pendency of the application for good cause;

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(G) not more than three customers in this State during the previous 12 months, in addition to those customers specified in subparagraphs (A) through (F) and under subparagraph (H), if the broker-dealer is registered under the Securities Exchange Act of 1934 or not required to be registered under the Securities Exchange Act of 1934 and is registered under the securities act of the State in which the broker-dealer has its principal place of business; and

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§ 21(2)(a)(vii).  Not more than three customers in this state during the previous twelve months, in addition to those customers specified in (a)(i) through (vi) of this subsection and under (a)(viii) of this subsection, if the broker-dealer is registered under the Securities Exchange Act of 1934 or not required to be registered under the Securities Exchange Act of 1934 and is registered under the securities act of the state in which the broker-dealer has its principal place of business; and

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(H) any other person exempted by rule adopted or order issued under this [Act]; and

§ 21(2)(a)(viii).  Any other person exempted by rule adopted or order issued under this chapter;

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(2) a person that deals solely in United States government securities and is supervised as a dealer in government securities by the Board of Governors of the Federal Reserve System, the Comptroller of the Currency, the Federal Deposit Insurance Corporation, or the Office of Thrift Supervision.

§ 21(2)(b).  A person that deals solely in United States government securities and is supervised as a dealer in government securities by the Board of Governors of the Federal Reserve System, the Comptroller of the Currency, the Federal Deposit Insurance Corporation, or the Office of Thrift Supervision;

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§ 21(2)(c)(i).  Subject to (c)(ii) and (iii) of this subsection, a broker-dealer that exclusively effects transactions:

      (A) Exempt under section 9 (13) or (25) of this act; or

      (B) Involving a federal covered security under Section 18(b)(4)(D) of the Securities Act of 1933 for which the issuer has made the filing and paid the fee required under section 14 of this act.

   (ii) A broker-dealer is not exempted under (c)(i) of this subsection if the broker-dealer, or any of the following persons, is currently the subject of an order, judgment, adjudication, determination, or conviction that would constitute grounds for discipline under section 32(4) (a) through (f), (h), or (k) through (m) of this act:

      (A) An employee, associate, partner, officer, or director of the broker-dealer;

      (B) A person having a status similar to, or performing functions similar to those performed by, the persons described in (c)(ii)(A) of this subsection; or

      (C) A person directly or indirectly in control of the broker-dealer.

   (iii) The exemption created by (c)(i) of this subsection is subject to any further provision to coordinate with federal or state law as may be imposed by rule adopted or order issued by the director; and

New provision to address the issue of “finders.”  While current WA law provides various B/D registration exemptions in this area, the USA does not.  This approach provides an exemption from broker-dealer registration requirements for certain finders who are not subject to statutory disqualifiers, or bearing certain relationships with such persons.  The exemption is intended to allow coordination with any future multi-state or federal approaches to regulation of finders.

See RCW 21.20.040(e), above.

§ 21(2)(d).  A person that participates only in the sale or offering for sale of variable contracts which fund corporate plans meeting the requirements for qualification under section 401 or 403 of the United States Internal Revenue Code as set forth in RCW 48.18A.060.

Addition to USA to preserve current RCW.

(c) [Limits on employment or association.]  It is unlawful for a broker-dealer, or for an issuer engaged in offering, offering to purchase, purchasing, or selling securities in this State, directly or indirectly, to employ or associate with an individual to engage in an activity related to securities transactions in this State if the registration of the individual is suspended or revoked or the individual is barred from employment or association with a broker-dealer, an issuer, an investment adviser, or a federal covered investment adviser by an order of the administrator under this [Act], the Securities and Exchange Commission, or a self-regulatory organization.  A broker-dealer or issuer does not violate this subsection if the broker-dealer or issuer did not know and in the exercise of reasonable care could not have known, of the suspension, revocation, or bar.  Upon request from a broker-dealer or issuer and for good cause, an order under this [Act] may modify or waive, in whole or in part, the application of the prohibitions of this subsection to the broker-dealer.

(2) It is unlawful for any broker-dealer or issuer to employ a salesperson unless the salesperson is registered or exempted from registration

§ 21(3).  Limits on employment or association.  It is unlawful for a broker-dealer, or for an issuer engaged in offering, offering to purchase, purchasing, or selling securities in this state, directly or indirectly, to employ or associate with an individual to engage in an activity related to securities transactions in this state if the registration of the individual is suspended or revoked or the individual is barred from employment or association with a broker-dealer, an issuer, an investment adviser, or a federal covered investment adviser by an order of the director under this chapter, the Securities and Exchange Commission, or a self-regulatory organization.  A broker-dealer or issuer does not violate this subsection if the broker-dealer or issuer did not know and in the exercise of reasonable care could not have known, of the suspension, revocation, or bar.  Upon request from a broker-dealer or issuer and for good cause, an order under this chapter may modify or waive, in whole or in part, the application of the prohibitions of this subsection to the broker-dealer.

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(d) [Foreign transactions.] A rule adopted or order issued under this [Act] may permit:

(1) a broker-dealer that is registered in Canada or other foreign jurisdiction and that does not have a place of business in this State to effect transactions in securities with or for, or attempt to effect the purchase or sale of any securities by:

(A) an individual from Canada or other foreign jurisdiction who is temporarily present in this State and with whom the broker-dealer had a bona fide customer relationship before the individual entered the United States;

(B) an individual from Canada or other foreign jurisdiction who is present in this State and whose transactions are in a self-directed tax advantaged retirement plan of which the individual is the holder or contributor in that foreign jurisdiction; or

(C) an individual who is present in this State, with whom the broker-dealer customer relationship arose while the individual was temporarily or permanently resident in Canada or the other foreign jurisdiction; and

(2) an agent who represents a broker-dealer that is exempt under this subsection to effect transactions in securities or attempt to effect the purchase or sale of securities in this State as permitted for a broker-dealer described in paragraph (1).

§ 21(4).  Foreign transactions.  A rule adopted or order issued under this chapter may permit:

(a) A broker-dealer that is registered in Canada or other foreign jurisdiction and that does not have a place of business in this state to effect transactions in securities with or for, or attempt to effect the purchase or sale of any securities by:

(i) An individual from Canada or other foreign jurisdiction who is temporarily present in this state and with whom the broker-dealer had a bona fide customer relationship before the individual entered the United States;

(ii) An individual from Canada or other foreign jurisdiction who is present in this state and whose transactions are in a self-directed tax advantaged retirement plan of which the individual is the holder or contributor in that foreign jurisdiction; or

(iii) An individual who is present in this state, with whom the broker-dealer customer relationship arose while the individual was temporarily or permanently resident in Canada or the other foreign jurisdiction; and

(b) A sales agent who represents a broker-dealer that is exempt under this subsection to effect transactions in securities or attempt to effect the purchase or sale of securities in this state as permitted for a broker-dealer described in (a) of this subsection.

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§402.  AGENT REGISTRATION REQUIREMENT AND EXEMPTIONS.tc \l2 "SECTION 402.  AGENT REGISTRATION REQUIREMENT AND EXEMPTIONS.

(a) [Registration requirement.] It is unlawful for an individual to transact business in this State as an agent unless the individual is registered under this [Act] as an agent or is exempt from registration as an agent under subsection (b).

See RCW 21.20.040 (addressing salesperson registration)

§ 22.  SALES AGENT REGISTRATION REQUIREMENT AND EXEMPTIONS. 

    (1) Registration requirement.  It is unlawful for an individual to transact business in this state as a sales agent unless the individual is registered under this chapter as a sales agent or is exempt from registration as a sales agent under subsection (2) of this section.

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(b) [Exemptions from registration.] The following individuals are exempt from the registration requirement of subsection (a):

§ 221(2).   Exemptions from registration.  The following individuals are exempt from the registration requirement of subsection (1) of this section:

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(1) an individual who represents a broker-dealer in effecting transactions in this State limited to those described in Section 15(h)(2) of the Securities Exchange Act of 1934 (15 U.S.C. Section 78(o)(2));

See RCW 21.20.040(1)(c)

§ 22(2)(a).  An individual who represents a broker-dealer in effecting transactions in this state limited to those described in Section 15(h)(2) of the Securities Exchange Act of 1934 (15 U.S.C. Sec. 78(o)(2));

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(2) an individual who represents a broker-dealer that is exempt under Section 401(b) or (d);

§ 22(2)(b).  An individual who represents a broker-dealer that is exempt under section 21 (2) or (4) of this act;

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(3) an individual who represents an issuer with respect to an offer or sale of the issuer’s own securities or those of the issuer’s parent or any of the issuer’s subsidiaries, and who is not compensated in connection with the individual’s participation by the payment of commissions or other remuneration based, directly or indirectly, on transactions in those securities;

§ 22(2)(c).  An individual who represents an issuer with respect to an offer or sale of the issuer's own securities or those of the issuer's parent or any of the issuer's subsidiaries, and who is not compensated in connection with the individual's participation by the payment of commissions or other remuneration based, directly or indirectly, on transactions in those securities;

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(4) an individual who represents an issuer and who effects transactions in the issuer’s securities exempted by Section 202, other than Section 202(11) and (14);

§ 22(2)(d).  An individual who represents an issuer and who effects transactions in the issuer's securities exempted by section 9 of this act, other than section 9 (11) and (14) of this act, but an individual who is compensated in connection with the sales agent's participation by the payment of commissions or other remuneration based, directly or indirectly, on transactions in those securities is not exempt if the individual is currently the subject of an order, judgment, adjudication, determination, or conviction that would constitute grounds for discipline under section 32(4) (a) through (f), (h), or (k) through (m) of this act;

USA with additional language to address agents, essentially serving as issuer-captive “finders,” with statutory disqualifications.

(5) an individual who represents an issuer that effects transactions solely in federal covered securities of the issuer, but an individual who effects transactions in a federal covered security under Section 18(b)(3) or 18(b)(4)(D) of the Securities Act of 1933 (15 U.S.C. Section 77r(b)(3) or 77r(b)(4)(D)) is not exempt if the individual is compensated in connection with the agent’s participation by the payment of commissions or other remuneration based, directly or indirectly, on transactions in those securities;

§ 22(2)(e).  An individual who represents an issuer that effects transactions solely in federal covered securities of the issuer, but an individual who effects transactions in a federal covered security under section 18(b)(3) or 18(b)(4)(D) of the Securities Act of 1933 (15 U.S.C. Sec. 77r(b)(3) or 77r(b)(4)(D)) and is compensated in connection with the sales agent's participation by the payment of commissions or other remuneration based, directly or indirectly, on transactions in those securities is not exempt if the individual is currently the subject of an order, judgment, adjudication, determination, or conviction that would constitute grounds for discipline under section 32(4) (a) through (f), (h), or (k) through (m) of this act;

USA with additional language to address the “finder” issue.

(6) an individual who represents a broker-dealer registered in this State under Section 401(a) or exempt from registration under Section 401(b) in the offer and sale of securities for an account of a nonaffiliated federal covered investment adviser with investments under management in excess of $100,000,000 acting for the account of others pursuant to discretionary authority in a signed record;

§ 22(2)(f).  An individual who represents a broker-dealer registered in this state under section 21(1) of this act or exempt from registration under section 21(2) of this act in the offer and sale of securities for an account of a nonaffiliated federal covered investment adviser with investments under management in excess of one hundred million dollars acting for the account of others pursuant to discretionary authority in a signed record;

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(7) an individual who represents an issuer in connection with the purchase of the issuer’s own securities;

§ 22(2)(g).  An individual who represents an issuer in connection with the purchase of the issuer's own securities;

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(8) an individual who represents an issuer and who restricts participation to performing clerical or ministerial acts; or

§ 22(2)(h).  An individual who represents an issuer and who restricts participation to performing clerical or ministerial acts; or

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(9) any other individual exempted by rule adopted or order issued under this [Act].

§ 22(2)(i).  Any other individual exempted by rule adopted or order issued under this chapter.

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(c) [Registration effective only while employed or associated.] The registration of an agent is effective only while the agent is employed by or associated with a broker-dealer registered under this [Act] or an issuer that is offering, selling, or purchasing its securities in this State.

(d) [Limit on employment or association.]  It is unlawful for a broker-dealer, or an issuer engaged in offering, selling, or purchasing securities in this State, to employ or associate with an agent who transacts business in this State on behalf of broker-dealers or issuers unless the agent is registered under subsection (a) or exempt from registration under subsection (b).

(e) [Limit on affiliations.] An individual may not act as an agent for more than one broker-dealer or one issuer at a time, unless the broker-dealer or the issuer for which the agent acts are affiliated by direct or indirect common control or are authorized by rule or order under this [Act].

§ 22(3).  Registration effective only while employed or associated.  The registration of a sales agent is effective only while the sales agent is employed by or associated with a broker-dealer registered under this chapter or an issuer that is offering, selling, or purchasing its securities in this state.

§ 22(4).  Limit on employment or association.  It is unlawful for a broker-dealer, or an issuer engaged in offering, selling, or purchasing securities in this state, to employ or associate with a sales agent who transacts business in this state on behalf of broker-dealers or issuers unless the sales agent is registered under subsection (1) of this section or exempt from registration under subsection (2) of this section.

§ 22(5).  Limit on affiliations.  An individual may not act as a sales agent for more than one broker-dealer or one issuer at a time, unless the broker-dealer or the issuer for which the sales agent acts are affiliated by direct or indirect common control or are authorized by rule or order under this chapter.

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