Registering as a broker-dealer in New York State involves specific requirements and procedures, depending on whether your firm is a member of the Financial Industry Regulatory Authority (FINRA). This guide provides a detailed overview of the registration process for both non-FINRA and FINRA broker-dealers, ensuring compliance and a smooth application.
Registration for Non-FINRA Broker-Dealers
For broker-dealers who are not members of FINRA, the registration process with the New York State Department of Law requires several key steps and filings. Understanding these requirements is crucial for firms operating outside of the FINRA framework in New York.
Required Filings and Fees
Non-FINRA broker-dealers must submit the following to register in New York:
- Form M-1: This is the primary registration form for non-FINRA broker-dealers in New York. A fee of $1,200 is required, covering a four-year registration period. Payment should be made payable to the New York State Department of Law.
- State Notice: A State Notice filing is also necessary, accompanied by a $75 fee.*
- Consent to Service of Process (Form U-2): If the issuer or brokerage firm is not a resident of New York, a Consent to Service of Process (Form U-2) must be filed. This form, along with any necessary brokerage firms filings, requires a total fee of $35.*
- Latest Financial Statement: Submission of your firm’s most recent financial statement is mandatory to assess financial stability and compliance.
Renewal Process
Registration for non-FINRA broker-dealers is not annual. Instead, renewal is required every four years from the initial effective date, which is indicated on the fee receipt provided upon successful registration. It’s important to track this date to ensure timely renewal and avoid any lapse in registration.
Important Prerequisites and Conditions
Before initiating the application process, non-FINRA broker-dealers should be aware of the following critical conditions:
- Home State Registration: If your firm’s principal place of business is located outside of New York, you must first be registered as a broker-dealer in your home state. New York requires this prerequisite for the application review process to commence.
- No Offers or Sales Before Acceptance: Crucially, no offers or sales of securities can be made in New York until the registration statement has been officially accepted for filing by the Department of Law.
- Notification of Completion or Deficiencies: The Department of Law will review your filing and notify you if it is incomplete or if further information is needed. Conversely, once the Office of the New York State Attorney General (OAG) determines your filing is complete, you will receive a permit receipt. This receipt serves as official proof that your submission has been accepted for filing and that you are authorized to operate as a registered broker-dealer in New York (for non-FINRA firms).
Registration for FINRA Broker-Dealers
Broker-dealers that are members of FINRA follow a different registration process in New York, leveraging the Central Registration Depository (CRD) system. This streamlined approach coordinates federal and state registration requirements.
Utilizing Form BD and the CRD System
FINRA member broker-dealers must register in New York by filing Form BD through the CRD online portal. The CRD system facilitates the sharing of pertinent information with the New York State Department of Law, simplifying the process for FINRA members.
All correspondence directed to FINRA should be sent to their designated mailing address: P.O. Box 9401, Gaithersburg MD 20898-9401. However, for New York State registration purposes, the CRD system is the primary interface.
Key Requirements for FINRA Members
- FINRA and SEC Approval: To operate as a broker-dealer in New York, FINRA member firms must be approved by both FINRA and the Securities and Exchange Commission (SEC).
- Home State Approval (If Applicable): Similar to non-FINRA firms, if a FINRA member firm’s principal place of business is not in New York, registration and approval in their home state is mandatory before New York registration can be finalized.
- No Offers or Sales Before Acceptance: Even for FINRA members, no offers or sales of securities are permitted in New York until the broker-dealer statement is officially accepted for filing by the Department of Law.
Application Status and Renewal
- Deficiencies in Applications: The New York State Department of Law will not accept applications that are incomplete or contain deficiencies, as per regulation 13 NYCRR 10.2(h). It is critical to ensure all filings are accurate and complete to avoid delays or rejection.
- CRD System Updates: FINRA member firms can track their application status and receive updates through the CRD system. This provides transparency and efficient communication regarding the registration process.
- Annual Renewal: Unlike non-FINRA registrations, FINRA member broker-dealer registrations must be renewed annually at year-end through the CRD system. This annual renewal ensures continued compliance and registration in New York.
Fingerprinting Requirements
New York General Business Law (GBL) section 359-e (12) – (12-b) outlines specific fingerprinting requirements for broker-dealers and salespersons. Understanding these requirements is essential for compliance.
Who Needs Fingerprinting?
Generally, fingerprinting is mandated for all individuals associated with a broker-dealer required to register with the Department of Law. This includes partners, officers, directors, and salespersons. An exception is made for personnel of securities issuers; they are typically exempt from these fingerprinting requirements. For precise details and exclusions, refer directly to GBL section 359-e (12) – (12-b).
Fingerprint Submission Process
- Existing Fingerprints on File: If fingerprints are already on file with FINRA, the SEC, or a major exchange, there is no need to refile them with New York. New York State recognizes these existing submissions.
- New Fingerprint Submissions: If fingerprints are not currently on file with any recognized agency, individuals must use the IdentoGO service. Visit www.identogo.com, select “Digital Fingerprinting,” and use the service code “1545Y8” to schedule and complete the fingerprinting process for New York State broker-dealer registration.
Registration for Officers, Directors, Principals, and Partners
Officers, directors, principals, or partners of registered broker-dealer firms have specific provisions under New York law regarding securities offerings and sales.
Exemption from Separate Salesperson Registration
Individuals in these roles (officers, directors, principals, or partners) who are listed on Form M-1 (for non-FINRA firms) or Form BD (for FINRA firms) after the form is completed and filed are authorized to offer and sell securities within or from New York State. They are not required to register separately as salespersons. This provision streamlines the registration process for key personnel within broker-dealer firms.
No Test Requirements for Principals
New York State does not impose specific test requirements for officers, directors, principals, or partners of broker-dealers, provided they are not applying for registration as individual salespersons. This exemption simplifies the qualification process for leadership roles within registered firms.
Out-of-State Firms
It’s reiterated that if a broker-dealer firm is located outside of New York, registration in their home state is a prerequisite for the New York application review process to proceed. This ensures that firms operating in New York from other jurisdictions meet baseline regulatory standards in their primary state of operation.
By understanding these comprehensive guidelines, broker-dealers can navigate the New York State registration process effectively, ensuring compliance and establishing a solid foundation for their operations within the state.
*Note: Fees are subject to change. Always verify the most current fee schedule with the New York State Department of Law.
