Broker-Dealer Requirements

In this correspondence, you will find information about certain provisions of the Corporate Securities Law of 1968 and the regulations under this law. This information is provided to assist you in complying with the law and its regulations as they relate to your investment advisory activities. The Commissioner may examine your books and records for compliance with the law and its rules.

The law may be found in the Corporations Code starting from section 25200 and the regulations in the California of Regulations starting from section 260.200. You may access these sections through https://dfpi.ca.gov/ under Licensees/Laws and Regulations.

A broker-dealer should promptly amend Form BD whenever the information in Form BD becomes inaccurate. Any amendments to Form BD should be filed within 30 days after the change has occurred. If the broker-dealer is filing with the CRD, the amendment should be filed directly with CRD in accordance with its procedures. If the broker-dealer does not file with CRD, the amendment should be filed directly with the Commissioner.

It is important Form BD contains current and accurate information. It is especially important that the contact person’s e-mail address is current. We use this e-mail address to keep you informed of current issues and developments.

A minimum annual renewal fee of $75 is due in December of each year. Payment of the assessment fee will keep the registration in effect during the next calendar year.

The minimum assessment fee should be paid directly to CRD in accordance with its instructions. Generally, the Preliminary Renewal Statement is available online for retrieval and printing via CRD beginning early November. CRD must receive full payment of the firm’s Preliminary Renewal Statement in early December. Detailed information concerning the renewal program may be found on FINRA’s website.

Additionally, starting on the 2026 renewal, an annual renewal fee of $50 will be added for every individual reported as a Registered Representative or Investment Adviser Representative pursuant to section 25608(p)(2). Please make sure to keep your reported individuals current by filing a U4 form to report or U5 form to terminate these individuals. Once your renewal statement is generated in IARD no adjustments can be made to the amount.

Every individual who is a broker-dealer, or a compliance supervisor, or reported agent of a broker-dealer must qualify by passing a securities examination as specified in Section 260.217(a)(1) and should meet all applicable examination requirements of the SEC and the self-regulatory organizations of which the broker-dealer is a member. The examination requirement is the Uniform Securities Agent State Law Examination (Series 63) or Uniform Combined State Law Examination (Series 66). FINRA administers both examinations.

You must report each agent to the Commissioner by filing Form U-4 with and paying the $50 reporting fee in effect July 01, 2025 to the CRD. The filing of Form U-4 with CRD does not constitute an automatic approval by the Commissioner. You should not consider an agent “registration” approved until approved by the Commissioner and you have been notified of the approval through CRD. You should also be aware of the employment and additional filing requirements for an agent. These requirements are found in Section 260.210.

1. Employment – Upon employment of an individual as an agent, Form U-4 including any Disclosure Reporting Page(s) (“DRP”) should be completed in accordance with the form instructions. If the broker-dealer is filing with CRD, Form U-4 should be filed with, and the reporting fee paid to, CRD in accordance with its procedures. If the broker-dealer is not filing with CRD, Form U-4 and reporting fee should be filed directly with the Commissioner. The filing of Form U-4 does not constitute an automatic approval. The broker-dealer should not consider an agent “registration” approved until approved by the Commissioner and the broker-dealer has been notified of the approval. If the broker-dealer is filing with CRD, the approval will be received through CRD.
2. Changes – Within 30 days of any changes to Form U-4, an amendment to Form U-4 should be filed. If the broker-dealer is filing with CRD, the amendment should be filed directly with CRD in accordance with its procedures. If the broker-dealer is not filing through CRD, the amendment should be filed directly with the Commissioner.
3. Termination – Within 30 days of termination of an individual as an agent, Form U-5 should be filed in accordance with the form instructions. If the broker-dealer is filing with CRD, Form U-5 should be filed directly with CRD in accordance with its procedures. If the broker-dealer is not filing through CRD, Form U-5 should be filed directly with the Commissioner.
4. Fingerprints – If the fingerprints of the individual to be employed as an agent for a non-FINRA broker-dealer are not on file with the Commissioner, such broker-dealer should file (1) a copy of the individual’s “Fingerprint Cards” page as found on CRD or (2) fingerprint information provided on forms from the Department and the cost of fingerprint processing. Information about whether an individual’s fingerprints are on file with the Commissioner may be obtained from any office of the Commissioner. Note: If the broker-dealer needs to file fingerprint information with the Commissioner, the Request for Live Scan Services form should be completed in triplicate. The fingerprints will be transmitted electronically to the Department of Justice (“DOJ”) for processing. The broker-dealer will be required to pay the fees charged by the DOJ for processing the fingerprints directly to the live scan operator. When filing Form U-4 with the Commissioner, the broker-dealer should include the Requesting Agency’s copy of the Request for Live Scan Services form and the $20 fingerprint processing fee. For current information concerning the location of live scan terminals, visit California Attorney General’s website.

Section 260.216.12 imposes limitations on minimum net capital and aggregate indebtedness. No broker-dealer shall permit its aggregate indebtedness to all other persons to exceed the limitations of 17 CFR 240.15c3-1 and Appendices A through D thereto (Rule 15c3-1) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934 and every broker-dealer shall have net capital necessary to comply with the conditions set forth in that rule.

1. If a broker-dealer is registered with the Securities and Exchange Commission (“SEC”), the broker-dealer is not required to file an annual financial report with the Commissioner but must provide upon request of the Commissioner a copy of any report filed under SEC Rule 17 CFR 240.17a-5.
2. If a broker-dealer is not registered with the SEC and is subject to the capital requirements found in Section 260.216.12, the broker-dealer should file with the Commissioner, not more than 90 days after its year-end, an annual financial report in accordance with the instructions found in Section 260.241.2. The financial statements included in the annual report should be prepared in accordance with generally accepted accounting principles and should be audited by either an independent certified public accountant or independent public accountant. The financial statements need not be audited if the broker-dealer has not held or accepted custody of funds and securities for or owed money or securities to customers or clients during the period covered by the report and the securities business has been limited to soliciting subscriptions for securities of an issuer and the broker-dealer promptly forwarded the subscriptions to the issuer, underwriter, or sponsor or other distributor of the securities and received checks, drafts, notes or other evidence of indebtedness payable solely to the issuer, underwriter, sponsor or distributor who delivered the securities purchased directly to the subscriber. A verification form should accompany the financial statements. The verification form (a) should affirmatively state, to the best knowledge and belief of the person making the verification, that the financial statements and supporting schedules are true and correct and (b) must be signed under penalty of perjury. The broker-dealer may use the Verification Form Pursuant to California Code of Regulations Rule 260.241.2(b) (Form 260.241.2(b)) for this purpose.

You are required to make and keep true, accurate and current books, ledgers and records relating to your broker dealer business. The types of books and records that must be maintained are found in Section 260.241.

A broker-dealer may surrender its registration by completing Form BDW in accordance with the Form BDW Instructions. If the broker-dealer is filing with CRD, Form BDW is to be filed directly with CRD in accordance with its procedures. If they are not filing with CRD, Form BDW is to be filed directly with the Commissioner.