Broker-Dealer Programs

In the U.S., broker dealers must register with the SEC, at least one SRO (e.g., FINRA if you will have a customer business, or an exchange if you will be a proprietary only firm), and if applicable, any relevant states.  Typical milestones in a broker dealer registration project include:

1. Selecting a name and reserving it with FINRA.
2. Gaining access to the FINRA system by appointing a Super Account Administrator.
3. Submitting Form BD for SEC registration approval.
4. Submitting FINRA Form NMA (or an Exchange membership application), which requires detailed information concerning the proposed business activities, written supervisory procedures, sample forms to be utilized, detailed biographies of executives and leadership, and detailed information about the how the Firm will be capitalized.
5. Membership interview and/or exchange onboarding.

1. Annual Reviews – FINRA and exchange rules generally require the CCO to review and author reports concerning the Firm’s compliance policies and procedures.
2. Annual Certification – The Firm’s CEO must make an annual certification, pursuant to the CCO’s report, that the Firm has conducted a review of its business activities and has appropriate policies and procedures in place.
3. Annual Audit – Broker dealers must have their financials audited by a PCAOB registered, independent auditor each year. The audit results must be filed with the Firm’s Designated Examining Authority and/or the SEC with 60 days of the Firm’s fiscal year end.
4. Anti-Money Laundering – Each year the Firm must have its AML program reviewed by an independent reviewer.
5. Training – Broker dealers must conduct an annual compliance meeting and provide relevant compliance training to its staff annually.

1. Upon receipt of a complete Form BD, the SEC has 45 days to approve or deny an application.
2. Upon receipt of a complete FINRA New Member Application, FINRA has 180 days to make a decision. Other SROs may have similar timing provisions in their respective rules.
3. These timelines can vary depending on how thorough and detailed the initial application documents are. The fewer follow up questions the SEC/FINRA have, the faster it can move through an application.

1. Uncertainty as to the businesses to be engaged in. FINRA expects fully fleshed out systems, plans and procedures.
2. Uncertainty as to entity structure or management.
   1. Individuals who control a broker dealer, directly or indirectly, including by virtue of just ownership, must generally be registered. Controlling persons should expect to have to take at least 2-3 exams.
   2. Legal and tax counsel should be consulted for the proper entity types (e.g., LLC, LP, etc.) to suit the businesses needs.
3. Underdeveloped platforms or technology. If a proposed broker dealer intends to rely on a platform, FINRA will expect that platform will be available for a demo.
4. Uncertainty as to funding sources. FINRA expects the prospective BD to demonstrate it has the financial resources to support its business initially, to trace the source of its funds to their origin, and to identify where, if needed, additional funding will come from.