An individual representing an issuer in transactions with employees, partners, or directors is generally excluded from the definition of agent unless compensation is received for soliciting those transactions. Because Robert receives commissions, he falls within the definition of an agent.

Why the Other Answers Are Incorrect

• Sarah Thompson is not an agent because she receives no compensation for the sales activity.

• Michael Reed is not an agent because municipal securities are exempt securities, and individuals representing issuers of exempt securities are excluded from the definition of agent.

• Jennifer Collins is not an agent because she represents a bank issuing exempt securities.

Series 63 Tip

For issuer transactions, remember the key exception:

Employees selling to employees, partners, or directors Not agents unless compensated.

Quick test rule:

The phrase "receives commissions" is often the clue that turns an otherwise excluded person into an agent.

Persons representing issuers of certain exempt securities, such as municipal securities and U.S. government securities, are excluded from the definition of agent and therefore are not required to register as agents under the Uniform Securities Act.

Why the Other Answers Are Incorrect

• An employee of a broker-dealer who solicits mutual fund sales by telephone and is paid a fixed salary must register because compensation method does not matter; solicitation of securities transactions requires registration.

• An employee of a broker-dealer who sends direct-mail solicitations for mutual funds and is paid hourly wages must register because the individual is engaged in securities sales activities.

• A college intern who receives compensation for referring prospective securities customers to a broker-dealer must register because compensation tied to securities business generally requires agent registration.

Series 63 Tip

A common exam trap is to focus on how someone is paid:

• Salary

• Hourly wage

• Commission

• Referral fee

For agent status, the key question is usually what the person does, not how they are paid.

Remember these common exclusions:

• Representatives of issuers of municipal securities

• Representatives of issuers of U.S. government securities

• Certain issuer representatives involved in exempt transactions

A useful shortcut:

Selling exempt securities for an exempt issuer = usually not an agent.
Selling securities for a broker-dealer = usually an agent, regardless of compensation method.

The Uniform Securities Act specifically excludes individuals who represent certain banking institutions in the sale of the bank's securities from the definition of agent. Therefore, an employee representing a national bank in the issuance of the bank's securities is not required to register as an agent.

Why the Other Answers Are Incorrect

• An employee of a state-chartered insurance company selling the company's securities is not covered by this specific exclusion.

• An employee of a public utility company selling the company's securities is not covered by this specific exclusion.

• An employee of a federal credit union selling the credit union's securities is not covered by this specific exclusion.

Series 63 Tip

This is one of the more subtle agent-registration rules.

The exam often tests the difference between:

• Exempt securities

• Exclusions from the definition of agent

Just because a security is exempt does not automatically mean the person selling it is excluded from the definition of agent.

A key exclusion to memorize is:

Individuals representing banks in the sale of bank securities are not agents.

The Series 63 frequently uses distractors such as:

• Insurance companies

• Credit unions

• Public utilities

Even though securities issued by these entities may be exempt, their representatives do not receive the same exclusion from the definition of agent that bank representatives receive.

An individual who receives compensation tied to securities sales activity or the solicitation of prospective customers is generally required to register as an agent. Because Danielle is paid based on her success in generating prospects for the firm's securities business, her activities go beyond clerical or administrative duties.

Why the Other Answers Are Incorrect

• Amanda organizes client files and updates account records is performing clerical and administrative functions.

• Brian distributes approved marketing materials in the firm's lobby is performing a non-sales administrative task.

• Christopher reviews research reports for spelling and grammatical errors before publication is performing a support function unrelated to securities solicitation.

Series 63 Tip

A key test concept is the difference between:

Clerical/Administrative Activity

• Filing documents

• Updating records

• Sorting mail

• Maintaining literature

• Proofreading reports

Sales-Related Activity

• Soliciting prospects

• Referring customers for compensation

• Receiving transaction-based compensation

• Being paid for successful leads

The moment compensation is tied to obtaining prospects or generating securities business, the individual will usually be considered an agent and must register. This is one of the most commonly tested agent-registration concepts on the Series 63.

An individual representing an issuer in transactions with employees, partners, or directors is generally excluded from the definition of agent unless compensation is received for soliciting those transactions. Because Robert receives commissions, he falls within the definition of an agent.

Why the Other Answers Are Incorrect

• Sarah Thompson is not an agent because she receives no compensation for the sales activity.

• Michael Reed is not an agent because municipal securities are exempt securities, and individuals representing issuers of exempt securities are excluded from the definition of agent.

• Jennifer Collins is not an agent because she represents a bank issuing exempt securities.

Series 63 Tip

For issuer transactions, remember the key exception:

Employees selling to employees, partners, or directors Not agents unless compensated.

Quick test rule:

The phrase "receives commissions" is often the clue that turns an otherwise excluded person into an agent.

A person who represents an issuer in effecting exempt transactions is excluded from the definition of agent under the Uniform Securities Act. One of the most common examples is a private placement transaction that qualifies for an exemption from registration.

Why the Other Answers Are Incorrect

• An individual representing a broker-dealer selling federal covered securities to retail clients is an agent because the person represents a broker-dealer in securities transactions.

• An individual representing a broker-dealer selling exempt securities to customers is an agent because broker-dealer representatives are agents regardless of whether the security itself is exempt.

• An individual representing a broker-dealer selling securities listed on a national exchange is an agent because the person is effecting securities transactions on behalf of a broker-dealer.

Series 63 Tip

This is one of the most important agent-registration rules:

Issuer + Exempt Transaction = Not an Agent

However:

Broker-Dealer + Any Security = Agent

The exam frequently tries to distract you with exempt securities or federal covered securities. Remember that the exemption status of the security usually does not matter when the person represents a broker-dealer.

A useful memory aid:

• Issuer + Exempt Transaction Not an Agent

• Broker-Dealer + Securities Sales Agent

Until an agent's registration becomes effective, the individual may not engage in activities that require agent registration. However, administrative, clerical, and research-related duties may be performed because they do not involve effecting or attempting to effect securities transactions.

Why the Other Answers Are Incorrect

• Accept securities orders from existing customers of the firm is incorrect because accepting orders is an agent activity requiring registration.

• Accept orders involving only exempt securities is incorrect because effecting securities transactions still requires agent registration.

• Solicit prospective customers under the supervision of a registered agent is incorrect because solicitation is an agent function and requires registration.

Series 63 Tip

A pending application does not grant temporary authority to act as an agent.

Before registration becomes effective, an applicant may perform:

• Clerical duties

• Administrative work

• Research

• Internal support functions

The applicant may not:

• Solicit customers

• Accept orders

• Recommend securities

• Receive transaction-based compensation

• Attempt to effect securities transactions

A useful rule:

No registration = No sales activity.
Administrative and research activities are permitted.

The Uniform Securities Act excludes from the definition of agent individuals who represent certain financial institutions in the sale of their securities. One of those excluded issuers is a savings institution organized and supervised under state law. Therefore, an employee selling securities on behalf of such an institution is not considered an agent.

Why the Other Answers Are Incorrect

• An employee of a federal savings and loan association is not covered by this specific exclusion.

• An employee of a state-chartered credit union is not covered by this specific exclusion.

• An employee of a state-chartered building and loan association is not covered by this specific exclusion.

Series 63 Tip

This is a memorization-heavy area of the exam.

The Series 63 often tests the difference between:

1. Exempt securities

2. Exclusions from the definition of agent

A security may be exempt from registration, but that does not automatically mean the person selling it is excluded from the definition of agent.

A favorite exam trap is grouping together similar financial institutions:

• Savings institution

• Savings and loan association

• Building and loan association

• Credit union

For agent-exclusion questions, read each institution carefully. The exam frequently tests whether you recognize that a savings institution receives special treatment that similar-sounding entities do not.

An individual who represents a broker-dealer in effecting or attempting to effect securities transactions is generally an agent, regardless of whether the security being sold is exempt, nonexempt, or a federal covered security.

Why the Other Answers Are Incorrect

• An individual representing an issuer in the sale of the issuer's municipal bonds is excluded because municipal securities are among the exempt securities for which issuer representatives may be excluded from the definition of agent.

• An individual representing an issuer in a private placement transaction exempt from registration is excluded because persons representing issuers in exempt transactions are not agents.

• An individual representing a state-supervised savings institution in the sale of the institution's securities is excluded under the issuer exclusions provided by the Uniform Securities Act.

Series 63 Tip

This is one of the most tested agent concepts:

If you represent a broker-dealer, you are almost always an agent.

The exam frequently tries to distract you by mentioning:

• Exempt securities

• Municipal bonds

• U.S. government securities

• Foreign government securities

• Federal covered securities

For a broker-dealer representative, the type of security generally does not matter.

A useful memory aid:

Broker-Dealer Representative = Agent

Issuer Representative = Check for an exclusion

When you see an answer choice involving a broker-dealer representative and another involving an issuer representative, the broker-dealer representative is often the correct answer.

When an existing client moves to a new state, the Uniform Securities Act permits the broker-dealer and agent to continue servicing the account temporarily while registration in the new state is completed. To continue the relationship legally, both the broker-dealer and the agent must become registered in the client's new state within the applicable time period.

Why the Other Statements Are Incorrect

• Statement III is incorrect because existing-client status does not permanently eliminate registration requirements.

• Statement IV is incorrect because there is no concept of automatic reciprocal registration under the Uniform Securities Act.

Series 63 Tip

A common exam rule is:

Client moves BD and Agent must register in the new state.

Remember:

• Agent registration depends on broker-dealer registration.

• Both registrations are required to continue servicing the client.

• Existing customers usually create a temporary grace period while registration is being completed.

• There is no reciprocal registration between states.

A good memory aid:

"Client moves, both move."

When the client changes states, both the broker-dealer's registration and the agent's registration must eventually follow.