Uniform Securities Agent State Law (Series 63) Practice Exam

What is the requirement for broker/dealers in relation to state registration?

1. They must register in their home state only

2. They must register in every state where they conduct sales

3. They do not need to register at all

4. They only need to register in three states

The correct answer is: They must register in every state where they conduct sales

Broker/dealers are required to register in every state where they conduct sales or offer securities to clients. This requirement ensures compliance with state laws and regulations that govern the sale of securities. The rationale behind this requirement is to protect investors and maintain market integrity by ensuring that broker/dealers are regulated and capable of meeting the standards set by each state’s securities authority. When broker/dealers do business in multiple states, they must adhere to state-specific regulations and requirements, which may vary from one state to another. This is crucial for investor protection and for maintaining an orderly market, as it helps ensure that broker/dealers meet the necessary qualifications, maintain proper conduct, and adhere to financial requirements established by each state. The other options do not accurately reflect the regulatory framework that governs broker/dealer registration. For example, stating that they only need to register in their home state does not account for activities conducted elsewhere, while asserting that they need to register in just a few states neglects the principle that registration is needed for every state in which business occurs.