The Individual Test, the Issuer Exclusions, Agent Registration and the One-Firm Rule

Under the Uniform Securities Act, an agent is any individual, other than a broker-dealer, who represents a broker-dealer or an issuer in effecting or attempting to effect purchases or sales of securities. In everyday language, an agent is the person who sells securities to the public on behalf of a firm, often called a registered representative or stockbroker.

The definition has two parts that the exam tests closely. An agent is always an individual, never a firm, and an agent always acts for someone else, either a broker-dealer or an issuer.

This guide covers the definition, who is excluded, how agents register, the rules on working for more than one firm, how agents differ from investment adviser representatives, worked examples, the exam traps and five practice questions. For the firms agents work for, FRC’s guide to broker vs dealer explains how broker-dealers operate.

Why the Definition Exists

State securities law regulates the people who sell securities, not just the securities themselves. The idea is simple: an investor dealing face to face with a salesperson should be dealing with someone the state has checked and can discipline.

The agent definition decides who falls under that oversight. If a person is an agent, they must register in each state where they do business, unless an exemption applies.

The definition is also what links a salesperson’s conduct to the state’s disciplinary powers. Once a person is an agent, the Administrator can deny, suspend or revoke their registration for misconduct, so investors have a clear route to complain and regulators a clear route to act.

Getting the definition right is just as important for the industry. A firm that lets an unregistered individual sell securities exposes both the individual and itself to enforcement, and investors may be able to undo the sales.

Where This Topic Appears on the Exams

The agent definition appears in the laws and regulations section of the Series 65, and it is a core topic on the Series 63 and Series 66. Questions describe a person and ask whether they are an agent, a broker-dealer, an investment adviser representative or none of these.

FRC’s Series 65 Exam Preparation course covers the Uniform Securities Act definitions in full, and the exam requires no sponsor. The Series 7 Exam Preparation course covers the representative’s role in detail, and the SIE Examination Preparation course introduces the registration framework.

Every FRC course can be spread across interest-free monthly payments, so cost is no reason to delay. Definition questions are among the most common on the state law exams, so a clear grasp of who is and is not an agent pays off repeatedly.

The Two Key Elements of the Definition

The first element is that an agent is an individual. A corporation, partnership or other legal entity can be a broker-dealer, an issuer or an investment adviser, but it can never be an agent.

The second element is representation. The individual must be acting for a broker-dealer or an issuer when they effect or attempt to effect securities transactions.

The words attempt to effect are important. A person who solicits orders, takes customer instructions or tries to sell securities is acting as an agent, even if no sale is ever completed.

Who Is Not an Agent

The Uniform Securities Act removes several groups from the definition. The most important is clerical and administrative staff who do not solicit or take orders, such as receptionists and operations staff processing paperwork.

Partners, officers and directors of a broker-dealer are not agents simply because of their title. They become agents only if they perform the functions of an agent, such as soliciting customers.

The largest set of exclusions concerns individuals representing issuers, which is covered in the next section. By contrast, an individual who represents a broker-dealer and sells securities to the public is always an agent, whatever securities they sell.

Individuals Representing Issuers

An individual who represents an issuer is not an agent when the transaction involves certain exempt securities. These include securities issued by the US government, states and municipalities, foreign governments that the US recognises, and banks, savings institutions and credit unions.

The individual is also not an agent when representing an issuer in an exempt transaction, such as a sale to an institutional investor. And an individual is not an agent when selling the issuer’s securities to the issuer’s own employees, partners or directors, as long as no commission or other remuneration is paid for soliciting those sales.

Outside these situations, an individual who sells an issuer’s securities to the public is an agent. A company employee who is paid a commission to sell the company’s shares to outside investors must register.

How Agents Register

An agent registers with the state through the broker-dealer or issuer they represent. For agents of broker-dealers, the firm files Form U4 through the Central Registration Depository, and FRC’s guide to what a CRD number is and how to find it explains how that record follows the agent.

Most states require agents to pass the Series 63, or the Series 66 together with the Series 7. Agents of broker-dealers also need the FINRA qualification for the products they sell, along with the SIE.

Under the Uniform Securities Act, registration generally becomes effective at noon on the 30th day after a complete application is filed, unless the Administrator acts sooner or the application is under review. Registrations typically expire on December 31 each year and must be renewed.

Registration Depends on the Relationship

An agent’s registration exists only as long as the agent is associated with a registered broker-dealer or issuer. When that relationship ends, the agent’s registration is no longer effective for that firm.

When an agent leaves, both the agent and the firm must promptly notify the Administrator. The agent cannot simply carry on selling securities on their own while waiting for a new job.

When an agent moves to a new broker-dealer, the new firm and the agent notify the Administrator, and the agent’s registration transfers. During the move, the agent must not do business until the new association is effective.

Working for More Than One Firm

Under the Uniform Securities Act, an agent generally cannot represent more than one broker-dealer or issuer at the same time. This prevents confusion over who is responsible for supervising the agent’s activity.

The exception is where the firms are affiliated by direct or indirect common control. In that case, the agent may represent more than one of them, because the same ownership is responsible for supervision.

The Administrator can also permit dual registration in other situations by rule or order. Without that permission, representing two unaffiliated firms at once is a violation.

Agents, Federal Covered Securities and Out-of-State Customers

An agent must still register even when the securities they sell are federal covered, such as listed stocks or mutual funds. The federal covered label removes the need to register the security, not the person selling it, and FRC’s guide to what a federal covered security is explains that distinction in full.

There is also no five-client de minimis exemption for agents, unlike investment advisers. An agent who sells to even one new individual customer resident in another state generally needs to be registered in that state.

The main exception is an existing customer who is only temporarily in another state, such as someone spending the winter away from home. In that case, the agent can usually continue to serve the customer without registering in the second state, provided the agent is registered in the customer’s home state.

Agents vs Investment Adviser Representatives

Agents and investment adviser representatives are both individuals, but they do different jobs. An agent represents a broker-dealer or issuer in buying and selling securities, typically paid by commission.

An investment adviser representative works for an investment adviser and gives advice for a fee, manages accounts or solicits advisory clients. Their registration usually requires the Series 65, or the Series 66 together with the Series 7.

Many professionals hold both registrations. FRC’s guide to investment advisor representative vs registered representative explains how the two roles compare in practice.

The Agent’s Ethical Obligations

Registration is only the start. Under NASAA’s model rules on dishonest and unethical practices, agents must not make unsuitable recommendations, trade excessively in customer accounts, use discretion without written authorisation or misrepresent the securities they sell.

Agents must also not share in the profits or losses of a customer’s account unless the firm permits it and the customer agrees in writing. Borrowing from or lending to customers is prohibited, except where the customer is a financial institution whose business includes lending, or where firm policy and state rules allow it in limited cases.

These rules mirror the FINRA conduct rules that agents of broker-dealers already follow. An agent who breaches them can lose their state registration as well as face FINRA discipline.

What Happens if an Unregistered Person Acts as an Agent

Acting as an agent without registration, when no exemption applies, is a violation of the Uniform Securities Act. The Administrator can issue a cease and desist order and take action against both the individual and any firm that employed them.

Investors who bought securities from an unregistered agent may have civil remedies, including the right to recover what they paid. The broker-dealer may also be liable for failing to supervise.

FRC’s guide to what powers the state Administrator has explains the enforcement tools available in these cases.

Worked Example: The Receptionist

A receptionist at a broker-dealer answers the phone, books meetings for the firm’s agents and passes on messages. She never discusses investments or takes orders.

She is not an agent, because her role is clerical and she does not solicit or effect transactions. She does not need to register.

If she began taking orders from customers when the agents were busy, she would be acting as an agent. At that point, she would need to be registered.

Worked Example: The Company Employee

A technology company raises money by selling shares in a non-exempt offering. Its finance manager is paid a bonus based on the number of shares she sells to outside investors.

She is an individual representing an issuer in a non-exempt sale, and she is paid for soliciting. She is an agent and must register in each state where she sells.

Had she sold the shares only to fellow employees without any extra pay for doing so, she would not be an agent. The commission and the outside buyers are what change the answer.

Worked Example: Two Firms

An agent registered with one broker-dealer is offered extra work selling for a second, unrelated broker-dealer in the evenings. The two firms have no common ownership.

He cannot accept without permission from the Administrator, because an agent generally may not represent two unaffiliated broker-dealers at once. Doing so without permission would be a violation.

If the two firms were owned by the same parent company, he could represent both. Common control is the key to the exception.

The Exam Traps

The first trap is calling a firm an agent. Only individuals can be agents, while firms are broker-dealers, issuers or advisers.

The second trap is assuming every person at a broker-dealer is an agent. Clerical staff who do not solicit are not, and officers and directors are agents only if they act as agents.

The third trap is forgetting the issuer exclusions for exempt securities, exempt transactions and commission-free sales to employees. The fourth trap is assuming an agent can work for two unaffiliated firms at once, when that is generally prohibited.

FRC’s guide to Series 65 ethics and laws questions and exam traps covers more traps in this area. For the full list, see FRC’s guide to Series 65 exam traps and common mistakes.

A Memory Aid

Remember “a person, for a firm, selling securities.” That covers the three parts of the agent definition: an individual, representing a broker-dealer or issuer, in securities transactions.

For the issuer exclusions, remember “exempt security, exempt transaction or employees without commission.” Those are the three situations where an issuer’s representative is not an agent.

Practice Questions

Question one: can a corporation be an agent under the Uniform Securities Act? No, only individuals can be agents.

Question two: a broker-dealer’s operations clerk processes trade paperwork but never speaks to customers about investments. Is she an agent? No, clerical staff who do not solicit are excluded.

Question three: an issuer’s employee sells the issuer’s municipal bonds to the public. Is he an agent? No, he is representing an issuer in an exempt security.

Question four: an agent leaves her broker-dealer. Who must notify the Administrator? Both the agent and the broker-dealer, promptly.

Question five: may an agent represent two broker-dealers at the same time? Generally no, unless the firms are under common control or the Administrator permits it.

Related Questions

Most agents start their careers as registered representatives at a broker-dealer. FRC’s guide to how to become a registered representative walks through the exams, sponsorship and first steps into the role.

Get Exam-Ready

Agent questions reward candidates who can apply the definition to a short scenario. Once the individual test, the representation test and the issuer exclusions are clear, these become some of the most dependable marks on the exam.

The FRC dictionary is more than a dictionary. It is a library of explainer videos, written explanations and on-page quizzes covering the FINRA and SEC rules you are tested on, so you can open any term and go deeper whenever a question catches you out.

Study With FRC

FRC’s programs and memberships are open to everyone. Whether you are preparing for the Series 65, the Series 7, the SIE or a combination, structured exam preparation turns topics like state registration into marks you can rely on.

FRC’s Professional Membership adds verified progress and a Digital Profile, so when you apply for roles, employers can see your exam progress and the knowledge you are building, not just read about it on a resume.

Your Next Step

An agent under the Uniform Securities Act is an individual who represents a broker-dealer or issuer in effecting or attempting to effect securities transactions. Clerical staff and certain issuer representatives are excluded, agents must register through their firm, and they generally may represent only one firm at a time.

Remember “a person, for a firm, selling securities,” and you will be ready for every version of this question the exam can ask.