Re: Notice-Registration as a Broker-Dealer

Dear NFA Member:

NFA has received inquiries from several sole proprietor IBs who are interested in soliciting and accepting orders for security futures contracts through their IBs but who are separately employed as registered representatives with fully-registered broker-dealers. Section 15(b)(11) of the Securities Exchange Act of 1934 allows registered FCMs and IBs to notice-register as broker-dealers for the purpose of soliciting and accepting orders for security futures products if the FCM or IB is a Member of NFA and is required to register as a broker-dealer only because of its security futures activities.

In that connection, SEC Rule 15b11-1 and Form BD-N require the FCM or IB to affirm that it limits its business in securities to business that does not otherwise require it to register as a broker-dealer. Individuals who conduct securities activities that require registration when they act as registered representatives are concerned about affirming on the Form BD-N that they limit their other securities activities to ones that do not require registration.

To help our IB Members better understand their registration requirements, NFA sent a letter on December 19, 2002, to the SEC asking it to confirm that these sole proprietor IBs are eligible to notice-register as broker-dealers. The SEC responded with a March 5, 2003 letter confirming that these sole proprietor IBs can notice-register as broker-dealers if they do not engage in any other securities activities requiring registration except as registered representatives. A link to a copy of the SEC's letter is is available at the bottom of this page (PDF format).

IBs that fall within the criteria in the letter may notice-register as broker-dealers by filing Form BD-N with NFA. The IB should answer "Yes" to Question 2C, thereby affirming that it will not engage in any other securities activities requiring registration except as a registered representative. Any IB that is concerned that the answer may be misleading can attach a short statement saying that the IB qualifies for notice-registration based on the SEC's March 5, 2003 letter.

NFA is pleased to provide this clarification to our IBs. If you have any questions, please contact Joe Patrick in NFA's Compliance Department at (312) 658-6521.

Very truly yours,

Regina Thoele
Managing Director
Compliance Department

SEC Letter to NFA dated March 5, 2003