§ 10-04-10 — Registration of broker-dealers, agents, investment advisers, and investment adviser representatives - Notice filings by federal covered advisers

North Dakota § 10-04-10

• Jurisdiction: North Dakota
• Title 10: Corporations
• Ch. 10-04: Supervision of Issue and Sale of Securities

Text

adviser representatives - Notice filings by federal covered advisers.
1. Broker-dealers. It is unlawful for a person to transact business in this state as a
broker-dealer unless the person is registered under this chapter as a broker-dealer or
is exempt. The following persons are exempt from the registration requirements:
a. A broker-dealer without a place of business in this state if its only transactions
effected in this state are with:
(1) The issuer of the securities involved in the transactions;
(2) A broker-dealer registered as a broker-dealer under this chapter or not
required to be registered as a broker-dealer under this chapter;
(3) An institutional investor;
(4) A nonaffiliated federal covered investment adviser with investments under
management in excess of one hundred million dollars acting for the account
of others pursuant to discretionary authority in a signed record;
(5) A bona fide pre-existing customer whose principal place of residence is not
in this state and the person is registered as a broker-dealer under the
Securities Exchange Act of 1934 or not required to be registered under the
Securities Exchange Act of 1934 and is registered under the securities laws
of the state in which the customer maintains a principal place of residence;
and
(6) A bona fide pre-existing customer whose principal place of residence is in
this state but was not present in this state when the customer relationship
was established, if:
(a) The broker-dealer is registered under the Securities Exchange Act of
1934 or not required to be registered under the Securities Exchange
Act of 1934 and is registered under the securities laws of the state in
which the customer relationship was established and where the
customer had maintained a principal place of residence; and
(b) Within thirty days after the customer's first transaction in this state, the
person files an application for registration as a broker-dealer in this
state and a further transaction is not effected more than forty-five days
after the date on which the application is filed, or, if earlier, the date on
which the commissioner notifies the person that the commissioner has

denied the application for registration or has stayed the pendency of
the application for good cause.
b. A person that deals solely in United States government securities and is
supervised as a broker-dealer in government securities by the board of governors
of the federal reserve system, the comptroller of the currency, the federal deposit
insurance corporation, or the office of thrift supervision.
Application for registration as a broker-dealer must be made in writing or
electronically in a form prescribed by the commissioner, must be signed by the
applicant, duly verified by oath, must be filed with the department, and must contain
information the commissioner determines to be necessary concerning the applicant.
The commissioner may also require such additional information relating to the
applicant and as to the previous history, record, or association of the applicant, its
officers, directors, employees, members, partners, managers, or trustees as the
commissioner deems necessary to establish whether or not the applicant should be
registered as a broker-dealer under the provisions of this law.
There must be filed with such application a written consent to the service of
process upon the commissioner in actions against such broker-dealer, conforming to
the requirements of section 10-04-14.
When an applicant has fully complied with the provisions of this subsection, the
commissioner may register such applicant as a broker-dealer unless the commissioner
finds that the applicant is not of good business reputation, or is not solvent, or the
applicant's principals and compliance or sales supervisor do not appear qualified by
training, examination, or experience to act on behalf of a broker-dealer in securities.
Except as prohibited by the Securities Exchange Act of 1934, the commissioner
may require an indemnity bond running to the state of North Dakota conditioned for the
faithful compliance by the broker-dealer and the broker-dealer's agents with all the
provisions of this law and for the faithful performance and payment of all obligations of
the broker-dealer and the broker-dealer's agents.
The bond must be of such type as may be approved by the commissioner and
must be in such amount as the commissioner deems necessary to protect purchasers.
Any such bond must have as surety thereon a surety company authorized to do
business in this state. When the commissioner has registered an applicant as a
broker-dealer, the commissioner shall notify the applicant of such registration.
2. a. Agent. It is unlawful for an individual to transact business in this state as an agent
unless the individual is registered under this chapter as an agent or is exempt
from registration. The following individuals are exempt from the registration
requirements:
(1) An individual who represents a broker-dealer in effecting transactions in this
state limited to those in section 15(h)(2) of the Securities Exchange Act of
1934;
(2) An individual who represents a broker-dealer that is exempt under
subsection 1;
(3) An individual who represents an issuer that effects transactions solely in
federal covered securities of the issuer, but an individual who effects
transactions in a federal covered security under section 18(b)(3) or 18(b)(4)
(D) of the Securities Act of 1933 is not exempt if the individual is
compensated in connection with the agent's participation by the payment of
commissions or other remuneration based, directly or indirectly, on
transactions in those securities; or
(4) An individual who represents a broker-dealer registered in this state or
exempt from registration in the offer and sale of securities for an account of
a nonaffiliated federal covered investment adviser with investments under
management in excess of one hundred million dollars acting for the account
of others pursuant to discretionary authority in a signed record.
b. Application for registration as an agent must be made in writing or electronically
in a form prescribed by the commissioner, must be signed by the applicant and by

the registered broker-dealer or issuer employing or proposing to employ such
applicant, duly verified by oath, must be filed with the department, and must
contain information the commissioner determines to be necessary concerning the
applicant.
c. The commissioner shall require as a condition of registration that the applicant
pass a written examination as evidence of knowledge of the securities business.
d. The commissioner may also require such additional information as to the
applicant's previous business experience as the commissioner deems necessary
to determine whether or not the applicant should be registered as an agent under
the provisions of this law. If an agent proposes to be self-employed, the agent
shall specifically state the particular security or securities the agent proposes to
sell in this state in the application, and if said security or securities are exempt
under section 10-04-05 or 10-04-06, or have been registered by announcement
under section 10-04-07.1, or have been registered by coordination under section
10-04-07.2, or have been registered by qualification under section 10-04-08, then
the commissioner may require that said self-employed agent file an indemnity
bond running to the state of North Dakota conditioned for the faithful compliance
by said self-employed agent with all the applicable provisions of this chapter and
for the faithful performance and payment of all obligations hereunder. The bond
must be in a form approved and in the amount required by the commissioner.
e. When an applicant has fully complied with the provisions of this subsection, the
commissioner may register such applicant as an agent unless the commissioner
finds that such applicant is not of good business reputation, or that the
broker-dealer named on the application is not a registered broker-dealer. When
the commissioner has registered an applicant as an agent, the commissioner
shall immediately notify the broker-dealer of such registration.
f. Every registered broker-dealer or issuer promptly shall notify the department of
the termination of the employment by the broker-dealer or issuer of a registered
agent.
Application for registration as an agent must be made in writing or electronically
in a form prescribed by the commissioner, must be signed by the applicant and by the
registered broker-dealer or issuer employing or proposing to employ such applicant,
duly verified by oath, must be filed with the department, and must contain information
the commissioner determines to be necessary concerning the applicant.
The commissioner shall require as a condition of registration that the applicant
pass a written examination as evidence of knowledge of the securities business;
provided, that not more than two officers or managers of an issuer may be registered
as an agent for a particular original offering of the issuer's securities without being
required to pass such written examination; and provided, further, that no such officer or
manager may again register within three years as such agent for this or any other
issuer without passing the written examination.
The commissioner may also require such additional information as to the
applicant's previous business experience as the commissioner deems necessary to
determine whether or not the applicant should be registered as an agent under the
provisions of this law. If an agent proposes to be self-employed, the agent shall
specifically state the particular security or securities the agent proposes to sell in this
state in the application, and if said security or securities are exempt under section
10-04-05 or 10-04-06, or have been registered by announcement under section
10-04-07.1, or have been registered by qualification under section 10-04-08, then the
commissioner may require that said self-employed agent file an indemnity bond
running to the state of North Dakota conditioned for the faithful compliance by said
self-employed agent with all the applicable provisions of this chapter and for the
faithful performance and payment of all obligations hereunder. The bond must be in a
form approved and in the amount required by the commissioner.
When an applicant has fully complied with the provisions of this subsection, the
commissioner may register such applicant as an agent unless the commissioner finds

that such applicant is not of good business reputation, or that the broker-dealer named
on the application is not a registered broker-dealer. When the commissioner has
registered an applicant as an agent, the commissioner shall immediately notify the
broker-dealer of such registration.
Every registered broker-dealer or issuer shall promptly notify the department of
the termination of the employment by the broker-dealer or issuer of a registered agent.
3. Investment advisers.
a. It is unlawful for any person to transact business in this state as an investment
adviser unless the person is registered under this chapter as an investment
adviser or is exempt from registration as an investment adviser. The following
persons are exempt from the registration requirements:
(1) A person without a place of business in this state that is registered under the
securities laws of the state in which the person has its principal place of
business if its only clients in this state are:
(a) Federal covered investment advisers, investment advisers registered
under this chapter, or broker-dealers registered under this chapter;
(b) Institutional investors; or
(c) Bona fide pre-existing clients whose principal places of residence are
not in this state if the investment adviser is registered under the
securities laws of the state in which the clients maintain principal
places of residences.
(2) A person without a place of business in this state if the person has had,
during the preceding twelve months not more than five clients resident in
this state in addition to those specified in paragraph 1; or
(3) Any other person exempted by rule or order of the commissioner issued
under this chapter.
b. Application for registration as an investment adviser must be made in writing or
electronically in a form prescribed by the commissioner, must be signed by the
applicant, duly verified by oath, must be filed with the department, and must
contain information the commissioner determines to be necessary concerning the
applicant.
The commissioner may also require such additional information relating to the
applicant and as to the previous history, record, or association of the applicant, its
officers, directors, employees, members, partners, managers, or trustees, as the
commissioner deems necessary to establish whether or not the applicant should be
registered as an investment adviser under the provisions of this chapter.
Except as prohibited by the Investment Advisers Act of 1940, the commissioner
may require an indemnity bond running to the state of North Dakota conditioned for the
faithful compliance by the investment adviser and the investment adviser's
representatives with all the provisions of this law and for the faithful performance and
payment of all obligations of the investment adviser and the investment adviser's
representatives. The bond must be of such type as may be approved by the
commissioner and must be in such amount as the commissioner deems necessary to
protect persons in this state. Any such bond must have as surety thereon a surety
company authorized to do business in this state.
The commissioner may by rule or order provide for an examination to be taken by
any class of or all applicants, as well as persons who represent or will represent an
investment adviser in doing any of the acts which make the person an investment
adviser.
When an applicant has fully complied with the provisions of this subsection, the
commissioner may register such applicant as an investment adviser unless the
commissioner finds that the applicant is not of good business reputation or is not
solvent.
A registrant as investment adviser shall notify the department of any change of
address.
4. Federal covered adviser.

a. Except with respect to a federal covered investment adviser described in
subdivision b, it shall be unlawful for a person to transact business in this state as
a federal covered adviser unless such person has made a notice filing with the
department, in writing or electronically, consisting of a copy of those documents
that have been filed with the securities and exchange commission as the
commissioner may require by rule or otherwise and the prescribed notice filing
fee.
b. The following federal covered investment advisers are not required to comply with
the notice filing requirement:
(1) A federal covered investment adviser without a place of business in this
state if its only clients are:
(a) Federal covered investment advisers, investment advisers registered
under this chapter, and broker-dealers registered under this chapter;
(b) Institutional investors; or
(c) Bona fide pre-existing clients whose principal places of residence are
not in this state.
(2) A federal covered investment adviser without a place of business in this
state if the person has had, during the preceding twelve months, not more
than five clients that are resident in this state in addition to those specified
under paragraph 1.
A notice filing is effective from receipt until the following December thirty-first. It
may be renewed by filing with the department, prior to expiration, those documents
filed with the securities and exchange commission as the commissioner may require
by rule or otherwise, with the notice filing renewal fee.
If the information contained in any document filed with the department is or
becomes inaccurate or incomplete in any material respect, the federal covered adviser
shall file an amendment with the department whenever such amendment is filed with
the securities and exchange commission.
A notice filing may be terminated by a federal covered adviser by filing a notice of
termination with the department.
5. Investment adviser representatives. It is unlawful for an individual to transact business
in this state as an investment adviser representative unless the individual is registered
under this chapter as an investment adviser representative or is exempt from
registration as an investment adviser representative or that the investment adviser
representative is employed by or associated with an investment adviser that is exempt
from registration or a federal covered investment adviser that is excluded from the
notice filing requirements.
Application for registration as an investment adviser representative must be
submitted in writing or electronically in a form prescribed by the commissioner, be
signed by the applicant and if applicable, by the investment adviser employing or
proposing to employ the applicant, be duly verified by oath, be filed with the
department, and contain information the commissioner determines to be necessary
concerning the applicant.
When an applicant has fully complied with the provisions of this subsection, the
commissioner may register the applicant as an investment adviser representative
unless the commissioner finds that the applicant is not of good business reputation;
that the investment adviser named in the application is not a registered investment
adviser; or the federal covered adviser named in the application has not made a notice
filing with the commissioner, as required by subsection 4. When the commissioner has
registered an applicant as an investment adviser representative, the commissioner
shall immediately notify the investment adviser or the federal covered adviser, as
applicable, of such registration.
Every registered investment adviser shall promptly notify the department of the
termination of the employment by the adviser of a registered investment adviser
representative. Every registered investment adviser representative employed by a
federal covered adviser or the federal covered adviser shall promptly notify the

department of the termination of such employment. The registration of the investment
adviser representative is automatically suspended from the time of termination of
employment until such time as the representative is registered by the commissioner as
a representative of another investment adviser or federal covered adviser.
The commissioner shall require as a condition of registration that the applicant
pass a written examination as evidence of knowledge of the securities business and
comply with any continuing education requirements as prescribed by the
commissioner. At the discretion of the commissioner, certain professional designations
may be accepted in lieu of an examination.
6. Refusal of registration. If the commissioner has reason to believe there are grounds to
refuse the approval of any application under this section, the commissioner may, by
order, summarily postpone the approval of any application made under this section. If,
after affording an applicant a hearing or an opportunity for a hearing as provided in
section 10-04-12, the commissioner finds that there is sufficient ground to refuse to
register such applicant as provided in this section, the commissioner shall enter an
order refusing to register such applicant. Such order shall state specifically the
grounds for its issuance. A copy of such order must be mailed to the applicant at the
applicant's business address, and if the application is for registration as an agent, to
the registered broker-dealer or issuer or if the application is for registration as an
investment adviser representative to the investment adviser or federal covered adviser
who proposed to employ such applicant. If the commissioner finds that an applicant
has been guilty of any act or omission which would constitute a sufficient ground for
revocation of a broker-dealer's, agent's, investment adviser's, or investment adviser
representative's registration under section 10-04-11, such act or omission may
constitute a sufficient ground for a finding by the commissioner that such applicant is
not of good business reputation.
7. Record and renewal of registrations. The names and addresses of all persons who
have been registered as broker-dealers, agents, investment advisers, or investment
adviser representatives, and all orders with respect thereto, and the names and
addresses of all federal covered advisers who have made a notice filing must be
recorded in a register of broker-dealers, agents, investment advisers, federal covered
advisers, and investment adviser representatives in the office of the commissioner.
Every registration and notice filing under this section expires on December thirty-first
of each year, unless renewed. The commissioner may by order provide for expirations
and renewals, including dates, forms, and procedures, adjust registration and notice
filing fees to correspond with expiration dates, and do any other thing which may be
necessary or convenient in order to participate in a central registration depository or
any similar arrangement designed to promote uniformity, to ease regulatory burdens,
or to encourage cooperation with other states, the securities and exchange
commission, or any registered national securities association or exchange.
8. Fees. The fee, which must accompany the application, for registration, transfer, or
notice filing, and for each annual renewal thereof is:
a. For each broker-dealer $240.00
b. For each agent $75.00
c. For each investment adviser or federal covered adviser $120.00
d. For each investment adviser representative $60.00
An application to register as a broker-dealer, agent, investment adviser, or investment
adviser representative may, with the consent of the commissioner, be withdrawn upon
written application.