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Do You Need a Securities License?

Post on: August 28, 2018 | Ryan Gunn | 0


Last month Tim Boykin, WealthForge’s corporate counsel, and Jim Raper, Chief Compliance Officer, sat down with Kim Lisa Taylor, Founder of Syndication Attorneys, for an educational tele-seminar, Do You Need a Securities License?, as part of a monthly series. During their hour long conversation, they cover the broker registration rule and its exceptions, the SEC’s enforcement of those rules, and the process of attaining proper licensure.

Here are a few key takeaways:

When does the issuer exemption apply?

The issuer exemption, as Tim notes, is “kind of a misnomer.” Confusingly, the commonly claimed exception to the broker-registration rule does not apply to the issuer as an entity, but to associated persons of the issuer. As Jim mentions, individuals tasked with selling the securities “may run afoul of the rule and may, in fact, be required to be registered.”

What activities require a license for an individual?

A person is required to register as a broker if he or she were performing certain activities to effect a securities transaction. The hallmark example where a licensure is required is if he or she is accepting “transaction-based compensation.” Tim gives the examples of “taking a percentage or basis points off the offering” or even receiving a bonus or other additional compensation related to securities work. Other activities may include serving as an investment advisor, consultant, placement agent, or participating in the negotiation of a securities transaction.  

When is real estate a security?

While there is a more sophisticated Howey Test, designed to determine what qualifies as a security, Jim provides a common-sense approach real estate brokers can start with before diving deeper: “[If] somebody is selling mortgages one for one, that’s not necessarily a security…But if you start to break it up and fractionalize it, then you syndicate it and it then fits into the definition of a security.”

What happens if you don’t get a license?

Tim outlines three possible scenarios. First, the SEC could revoke the issuer exemption, meaning you would have to give investors their money back. Second, you could be “disgorged of the commissions that you earned.” This could result in the SEC coming after your personal finances and possessions. Lastly, the company and individuals involved could be labeled as bad actors, which means they would be “prohibited from raising capital…under these exemptions in the future.”

The talk also includes information on what licenses are needed in certain situations, the pros and cons of setting up a broker-dealer, and how to affiliate with an existing broker-dealer.


Listen to the full audio recording here: 



Kim Lisa Taylor

Kim is the founder of Syndication Attorneys PLLC, a boutique corporate securities law firm that helps clients nationwide with their federal real estate securities offerings. In addition to her work with the firm’s clients, Kim is a nationally recognized expert in the securities industry and a highly sought-after speaker, instructor and author.

Tim Boykin

Tim focuses on strategic, firm-wide risk management, including cybersecurity and regulatory matters. His goal is to provide excellent customer service, while appropriately limiting liability, for WealthForge’s internal and external clients and stakeholders. Tim earned a bachelor’s degree from the College of William and Mary and received a JD and MBA from the University of Richmond. He holds the CIPP/US certification.

Jim Raper

During his 30 years of experience, Jim has developed a refined understanding of the operational and financial attributes of successful companies. Jim relies on his expert knowledge about the regulatory environment to help guide both WealthForge and our clients through the complexities of raising capital online. He holds his Series 7, 24, 27, 63, 79 and 99 licenses.


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About author

Ryan Gunn

Ryan leads content creation at WealthForge. He earned his bachelors from Virginia Tech and MBA from the College of William & Mary. His writings on fintech, alternative investments, and advisory best practices have been featured in Real Assets Advisor, Alternative Investments Quarterly, Equities, and other industry publications.
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