Broker-dealer

A broker-dealer is the firm that intermediates in securities in the U.S. As a broker, it effects securities transactions for the account of others; as a dealer, it buys and sells securities for its own account as a business (Exchange Act §3(a)(4)(A) and §3(a)(5)(A), 15 U.S.C. 78c(a)(4) and (5)). Unless exempt, it must register with the SEC before doing business and, in general, be a FINRA member.

SEC registration and FINRA membership. It is unlawful for a broker or dealer to use the means of interstate commerce to effect or induce securities transactions without being registered, although the SEC may grant exemptions (§15(a), 15 U.S.C. 78o(a)). The application is Form BD, filed through the Central Registration Depository (CRD) operated by FINRA (17 CFR 240.15b1-1). Within 45 days, unless the applicant consents to a longer period, the SEC either grants registration or institutes proceedings to decide whether to deny it (§15(b)(1)). It must also be a member of a registered securities association unless it trades only on exchanges of which it is a member (§15(b)(8)); the SEC staff guide specifies that, if it trades elsewhere, it must become a FINRA member unless it qualifies for the Rule 15b9-1 exemption. To be registered, its professionals must pass the SIE exam and one or more qualification exams.

How to check one: BrokerCheck. BrokerCheck is FINRA's free tool for researching the professional backgrounds of brokerage firms, investment adviser firms and investment professionals. Brokerage firm data comes from the CRD; for individuals, the report includes their history and any disclosures, such as customer disputes, disciplinary events and certain criminal and financial matters. Before engaging a broker-dealer or an ATS, it is worth looking up the firm and noting its CRD number.

When an activity is broker activity. The SEC staff guide to broker-dealer registration (last reviewed or updated December 12, 2016; non-binding) looks at what the person actually does. A "yes" to any of these questions indicates that registration may be needed:

• Does it participate in important parts of the transaction, such as soliciting investors, negotiating or executing?
• Does its compensation depend on the outcome or size of the transaction, or is it otherwise transaction-related?
• Is it otherwise engaged in the business of effecting or facilitating securities transactions?
• Does it handle the securities or funds of others in connection with securities transactions?

The guide expressly mentions people who find investors for issuers, even as "consultants," placement agents for private placements, and those who operate or control electronic platforms to trade securities.

Under Reg D and Reg A, the rules do not require a broker to be involved. Regulation D and Regulation A+ do not require a broker to be involved; Reg CF does require an intermediary, either a broker-dealer or a funding portal (17 CFR 227.100(a)(3) and 227.300(a)). According to the staff guide, an issuer is generally not a broker, because it sells its own securities for its own account; if it goes further, for example by buying back securities from investors or effectively operating a market in its securities, it must consider whether it needs to register. Its employees can rely on Rule 3a4-1 if they are not subject to a statutory disqualification, are not paid commissions or other transaction-based compensation, are not associated with a broker-dealer and meet one of its alternative conditions (17 CFR 240.3a4-1). That safe harbor only covers individuals associated with the issuer (partners, officers, directors or employees), not an outside platform.

What it does in a tokenized offering, and why the technology provider does not do it. The broker-dealer can place the offering on the issuer's behalf, hold the securities in custody and, if it operates an ATS, run the secondary market; SEC staff accept that an ATS operator may also perform broker, custodial and clearing functions (Trading and Markets FAQ, question 14; non-binding). A technology platform that solicits investors for a specific offering, is paid based on what it places, or touches investors' money or securities shows the guide's warning signs. The staff statement of April 13, 2026 on user interfaces does not change that: it is limited to transactions the user initiates from a self-custodial wallet, for a fixed, neutral charge, and does not cover anyone who solicits investors for specific transactions (non-binding). The CLARITY Act bill, which is not law, would also create a CFTC registration for brokers and dealers in "digital commodities" (Sec. 406 of the House text). The holder record is kept by the issuer or its transfer agent; the full picture is in the guide to tokenization in the U.S.

Official sources: 15 U.S.C. 78c(a)(4) and (5); 15 U.S.C. 78o (Section 15); 17 CFR 240.15b1-1 (Form BD); 17 CFR 240.3a4-1; Guide to Broker-Dealer Registration (SEC); About BrokerCheck (FINRA); staff statement on user interfaces (4/13/2026).

Framework verified as of October 13, 2026. At Unknown Gravity we build the platform, the smart contracts and the integrations with the client's registered broker-dealer, working alongside the client's U.S. securities counsel. We are not a broker-dealer, funding portal, transfer agent, ATS, investment adviser or law firm. Talk to us.