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Securities FAQs

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Are broker-dealer firms required to send annual financials?

Only if the firm is not a FINRA member.


Is there a de minimis exemption from broker-dealer firm registration?

Yes. If the firm has no place of business in Idaho and has had 3 or fewer Idaho customers in the previous 12 months, it is exempt from registration. In addition, the firm must be registered with the SEC as a broker-dealer or exempt from SEC registration.


When applying for broker-dealer registration through the Central Registration Depository (CRD) system, is my firm required to send anything directly to Idaho?

No.


What are Idaho’s fees to register as a broker-dealer?

$200 for the firm and $50 per agent paid through the CRD system.


Is a Designated Principal required for a broker-dealer firm?

No.


Do you require notification of branch offices located in Idaho? If so, is there a fee required?

Yes, we require notification of opening, closing and amending branch offices. This may be done through the CRD system by completing the Form BR. There is no state fee required.

How do I get licensed to sell securities?

You must be affiliated with a broker-dealer firm that is licensed in Idaho. A compliance officer within the firm should guide you through the application process.


How much does it cost to get licensed?

Idaho’s fee is $50. Please note there may be other costs involved that are not for our Department.


What examinations are required for broker-dealer agents to become licensed?

The Series 63 or 66, plus at least one other general securities exam. The other exam(s) depend on what type of securities you are selling. Your firm and FINRA will help you determine what exam(s) you need.


How do I get scheduled to take an exam?

You must have a sponsor (i.e. a broker-dealer firm) in order to take almost all exams. Your broker-dealer firm will get you scheduled for any needed exams. Please note that if you wish to take the Series 63, 65 or 66, you do not need a sponsor (Form U-10). The U-10 is the application to get scheduled to take an exam if you are not affiliated with a sponsoring firm. Information on how to get scheduled for those exams may be found at www.finra.org.


What is the cost to take a FINRA examination?

A registration and exam fee schedule may be found at www.finra.org.


Where are the testing centers located?

The locations and other related information may be found at www.finra.org.


Where may I obtain study material for a test?

A list of study material vendors may be found at www.finra.org.


If I have further questions regarding the exam process, what number may I call?

You may call the FINRA help desk in Rockville, MD at 301-590-6500.

Are investment adviser firms required to send annual financials?

Only if the firm is Idaho based and state regulated.


Is there a de minimis exemption from investment adviser firm registration?

Yes. If the firm has no place of business in Idaho and has had 5 or fewer Idaho clients during the previous 12 months, it is exempt from licensing or from having to notice file.


When doing a notice filing through the Investment Adviser Registration Depository (IARD) system, is my firm required to send anything directly to Idaho?

No


What are Idaho’s fees to register or notice file an investment adviser firm?

State Regulated firm-$150; Federally Regulated firm-$30 paid through the IARD system.


How does a State Regulated firm become registered?

Please refer to “Investment Adviser Application Procedures and Information” at Securities Forms. Refer to #2A or #2B” depending on where your firm is based.


How do I add or delete agents to my firm?

Go to www.iard.com/nav_guides; Click on Web CRD Quick Reference Guides/ Form U-4

What examinations are required for Investment adviser agents to become licensed?

Either the Series 65 or the Series 66, the Securities Industry Essentials exam (SIE), and Series 7. For more detailed information including waivers and exemptions, please refer to “Investment Adviser Representative Registration and Exemption” at Securities Forms.

Note: For additional exam questions you may have, please refer to the answers given above under “Broker-Dealer Agents.”


How much does it cost to get licensed?

Idaho’s fee is $30. Please note there may be other costs involved that are not for our Department.

Where can one find information as to the events that disqualify a person from being able to rely on Rule 506, and the persons to whom these rules apply?

The events that disqualify a person from being able to rely on Rule 506, and the persons to whom these rules apply are set forth in new Rule 506(d) of Regulation D.


Can Broker-Dealers use 506(c) to generally solicit the sale of securities?

Yes. Broker-Dealers may generally solicit under new Rule 506(c), provided that the following conditions are satisfied:

  1. all terms and conditions of Rule 501 and Rules 502(a), which relates to integration of offerings, and 502(d), which relates to resale restrictions, must be satisfied;
  2. all purchasers of securities must be accredited investors; and
  3. the issuer must take reasonable steps to verify that the purchasers of the securities are accredited investors.

Broker-dealers participating in offerings in conjunction with issuers relying on Rule 506(c) continue to be subject to FINRA rules regarding communications with the public, which, among other things, (1) generally require all member communications to be based on principles of fair dealing and good faith, to be fair and balanced, and to provide a sound basis for evaluating the facts in regard to any particular security or type of security, industry or service; and (2) prohibit broker-dealers from making false, exaggerated, unwarranted, promissory or misleading statements or claims in any communications. See FINRA Rule 2210.


Are there any special implications for a broker-dealer and its salespersons that participate in an offering exempt under Rule 506(c)?

FINRA members that sell securities in an offering exempt from registration under Rule 506(c) must “(i) submit to FINRA a copy of any private placement memorandum, term sheet or other offering document, including any materially amended versions thereof, used in connection with such sale within 15 calendar days of the date of first sale; or (ii) notify FINRA that no such offering documents were used.” FINRA Rule 5123. Further, salespersons of broker-dealer firms must ensure their firm has authorized their participation in the offering.


Are securities sold under new Rule 506(c) considered covered securities?

Yes. New Rule 506(c) offerings are considered covered securities under the National Securities Markets Improvement Act (“NSMIA”). However, issuers must look to each state where they offer or sell their securities to determine any applicable notice filing requirement(s). Issuers should also be aware that fraudulent representations would still make them subject to state law.


Can Issuers relying on Rule 506(c) allow investors to “check the box” indicating that they are an accredited investor?

No. New Rule 506(c) permits issuers and broker-dealers to use general solicitation and general advertising to offer their securities provided that (1) the issuer takes reasonable steps to verify that the investors are accredited investors and (2) all purchasers of the securities fall within one of the categories of persons who are accredited investors under an existing rule (Rule 501 of Regulation D) or the issuer reasonably believes that the investors fall within one of the categories at the time of the sale of the securities. The determination of the reasonableness of the steps taken to verify an accredited investor is an objective assessment by an issuer. An issuer is required to consider the facts and circumstances of each purchaser and the nature of the offering.


Are there any approved methods of verifying an investor’s status as an accredited investor?

The SEC has specified four specific non-exclusive methods of verifying accredited investor status for natural persons that, if used, are deemed to satisfy the verification requirement in Rule 506(c). These methods will not be deemed to satisfy the verification requirement, however, if the issuer or its agent has knowledge that the purchaser is not an accredited investor. These methods of verification are set forth in Rule 506(c)(2)(ii).


Can an Investment Adviser offer the same fund via new Rule 506(c) and traditional Rule 506(b) so long as they ensure that any investor contacted through general solicitation is an accredited investor?

No. An issuer must either check the box for a Rule 506(b) offering or a Rule 506(c) offering, but not both. Under new Rule 506(c) all purchasers of the securities must fall within one of the categories of persons who are accredited investors under an existing rule (Rule 501 of Regulation D) or the issuer must reasonably believe that the investors fall within one of the categories at the time of the sale of the securities. Once a general solicitation has been made to the purchasers in an offering, an issuer is not able to rely on Rule 506(b). Accordingly, a fund must either be sold in compliance with 506(b) or new Rule 506(c).


Will investment advisers to private funds be allowed to generally solicit their new funds under new Rule 506(c)?

Yes. Section 201(b) of the JOBS Act permits offers and sales of securities under Rule 506(c) by private funds relying on the exclusions from the definition of “investment company” under Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act. Accordingly, starting September 23, 2013, private fund advisers may generally solicit the sale of interests in their newly formed funds.


How does the lifting of the ban on general solicitation apply with respect to Rule 144A offerings?

Pursuant to amendments to Rule 144A, securities offered pursuant to Rule 144A are permitted to be offered to persons other than qualified institutional buyers, provided that the securities are sold only to persons that the seller and any person acting on behalf of the seller reasonably believe are qualified institutional buyers.


Can an issuer rely on a third party to verify a person’s status as an accredited investor?

Yes, an issuer will be entitled to rely on a third party that has verified a person’s status as an accredited investor, provided that the issuer has a reasonable basis to rely on such third-party verification.

In what instance is the Surety bond statutory requirement waived?

If the agency’s Errors and Omissions (aka “E&O” or “professional liability”) coverage is $250,000 and the Fidelity (aka “commercial crime”) coverage is $1,000,000. For the Policy Statement, Escrow Act Policy Statement.


Is a supervisor required to be located in the branch office he or she is supervising?

No. A supervising escrow officer can be in charge of multiple locations.


Which banks can be used to maintain the required trust account?

Any bank authorized to do business in Idaho.


What happens when the bank listed in the Authorization to Examine Trust Account form is no longer doing business in the location listed on the form?

An updated Authorization to Examine Trust Account form must be submitted to the Department with the new location and the bank’s verification.

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