The Needed Licenses to be an Investment Broker

Undoubtedly, industries that involve the public-at-large are often regulated to protect individuals from unscrupulous sellers and inferior or dangerous products. Investments are no different, since people can lose large sums of money through scams and other nefarious schemes. In an attempt to curtail fraud, and maintain a clean image in the investment community, the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) oversee components of the investment or securities process. In addition to being registered with the SEC and members of FINRA, brokers must also meet conditions set down by individual state regulatory agencies. In fact, the needed licenses to be an investment broker may vary by region and state.

Generally, someone who wishes to become a bona fide investment broker does so by studying for and writing one of the various examinations within their area of expertise. Examples might be options, securities, or commodities. In addition, an exam given by FINRA will also be necessary in order to qualify. Lastly, any exams that are required by an individual state. Most states also have bonding requirements and minimums standards which must be met.

Departments created for the purpose of monitoring financial activities fall into different categories depending on the state. Some are segments of the Attorney General Offices, some are independent Boards, and others are components of Consumer Protection Agencies. In New York, for example, the AG's Office is responsible for the Investor Protection Bureau which enforces the Martin Act, the securities legislation in the state of NY. All brokers, dealers, securities salespeople, and investment advisers operating in NY are required to register with the AG's Office.

In Texas, the Texas State Securities Board, charged with the task of enforcing the Texas Securities Act, is overseen by a board chosen by the Governor of the state. The State Securities Board is responsible for examining every application from dealers, sales agents, brokers, advisers, and representatives to ensure solvency and that minimum state requirements are met. Background checks are also performed before the applicant is accepted to register with the Board. Registration, of course, being mandatory. Further, applicants must pass all mandated exams, and agree to specific record-keeping and full-disclosure methods. Registrations are granted for one-year periods only, and must be renewed on time to remain in good standing.

Typically, each state has varying registration requirements. In some states, exemptions are given to investment firms or brokers with no in-state office and less than a specific number of clients in the state. Others, like North Dakota, however, require registration with only one client in ND. The individual states also decide which exams are required for licensing. The General Securities Representative Examination, currently referred to as the Series 7 Examination is required to sell any type of security. Series 63 is the minimum for most sellers. Other Series exams are series 4, 6, 9, 10, 11, 17, 22, 23, 24, 26, 27, 28, 37, 38, 39, 42, 51, 52, 53, 55, 62, 72, 79, 82, 86 and 87. Taking the appropriate exam will depend on the specialty and level of status such as individual, manager, or analyst.

Finally, brokers and firms alike must review any and all city and regional ordinances to determine whether vendors' permits, business licenses, and other forms of documentation are required to conduct business. Lastly, individual firms may expect and demand special certification for their employees.