If an issuer of securities does not wish to use a broker-dealer to distribute its securities to the public, it may decide to market them directly to the public. Issuers may choose to have an officer, director or other employee make the solicitations and effect the sales or they may hire a third party specifically for the purpose of soliciting buyers. These individuals may be considered Agents of the Issuer as that term is defined in the Wisconsin Uniform Securities Law. Depending on a number of factors, these agents may need to be registered with the Division of Securities before commencing any solicitation activities. One important factor is the security registration or exemption used to qualify the offering for sale in the state. No determination of agent registration requirements can be made until the security registration or exemption filing has been made or, in the case of an exemption that does not require filing, the issuer has explained to the division which exemption it is relying on and how the issuer intends to meet the provisions of that exemption.
Wis. Stat. s. 551.102(2), defines “agent” as “any individual other than a broker-dealer who represents a[n]…issuer in effecting or attempting to effect purchases or sales of the issuer’s securities. But a partner, officer, or director of a[n]…issuer, or an individual having a similar status or performing similar functions, is an agent only if the individual otherwise comes within the term.” The division considers what the individual’s role is in the offering, whether there is compensation received in connection with the solicitation or sale, and any exemptions that might be available. In other words, a person who solicits purchasers or in anyway promotes the sale of an issuer’s securities would be considered an agent unless one of the following conditions exists:
- If the issuer is relying on any security registration exemption in Wis. Stat. s 551.202 [except for Wis. Stat. s. 551.202(11), (14) or (24)], the person would be exempt from the registration requirement for agents in Wis. Stat. s. 551.402(2)(d). This includes certain accredited investors as defined in Wis. Stat. s. 551.202(13)(am);
- If the issuer is offering only securities that are classified as federal covered securities pursuant to the limitation of Wis. Stat. s. 551.402(2)(e); or
- If a person solicits or otherwise attempts to effect a sale on behalf of the issuer but does NOT receive any compensation in any form, directly or indirectly, for those efforts, the person is excluded from the definition of agent and therefore, not required to be registered. The compensation does not have to be strictly in the form of a commission. A bonus, per contact fee, or even a portion of a salary or tangible goods such as trips, vehicles, or other items of value could all be considered compensation. The compensation also does not necessarily have to come from the issuer.
The first two exclusions above are easily verified by the issuer providing the security exemption relied upon for issuance of the security. The third is slightly more complex. Therefore, here are some common examples of situations that do and do not meet the exclusion requirements:
An officer, director or other employee of an issuer is asked to assist with the offering, but no compensation is given to or received by the person, and the person’s primary duties in their position are duties other than the offer and sale of securities.
The person would be excluded from the definition of agent—no registration required.
An officer, director or other employee has the offer and sale of securities as a significant percentage of the person's job duties and is receiving a salary and possibly a bonus.
If the person was hired or otherwise given formal responsibility for selling securities and they would not be retained in their position if securities activities were not performed, the staff would consider a portion of the person's salary or bonus to be related to the sale of securities—registration would be required.
An officer, director or other employee is given a two-week trip to Hawaii if a predetermined amount of securities are sold but receives no cash compensation.
The person has received compensation directly related to the sale of securities—registration would be required.
A prospective buyer wants to be sure to be able to purchase securities in a highly sought-after offering. The prospective buyer gives a gift of value to the solicitor in return for being given priority in purchasing securities.
The person has received compensation directly related to the sale of securities—registration would be required. The source of the compensation makes no difference in the determination.
The issuer enters into an arrangement with an independent third party to handle the offer and sale of its securities.
The third party is not an officer, director or employee of the issuer and so has no exclusions available—registration would be required.
A telemarketing service is hired to contact prospective purchasers and either provide information about the offering by phone or mail or qualify the prospect as to their interest and ability to make investments similar to those being offered, with the intention of having another party handle the final sale details.
Effecting or attempting to effect transactions both trigger the definition of agent. Any information gathering that would be used to qualify a potential purchaser or soliciting interest by providing detailed information and benefits of investing all constitute an attempt to effect a transaction—registration would be required
If in doubt about whether a person would be required to be registered as an Agent of the Issuer, contact the division’s examiner line at (608) 266-2139.
Filing an application
The division uses Form U4 as the application form for registration of Agents of the Issuer, which is submitted on paper directly to the division. Because this is the uniform application form for broker-dealer agents and investment adviser representatives, there may be some portions of the form that are not relevant. For instance, someone who has never been in the securities industry before will likely not have a Central Registration Depository (CRD) identification number. Fill in all relevant areas, including Social Security number, current and previous addresses, employment and especially the disciplinary questions. The applicant and an officer of the issuer should sign the form. Fingerprint cards are not required.
On the Department of Financial Institutions (DFI) website, you can also find the U4 Supplemental Form DOS300. This form asks for information specific to the Agent of the Issuer activity and should be submitted with the Form U4 application.
It is the responsibility of the issuer to ensure that its agents are registered if necessary and to instruct and supervise them regarding disclosure requirements and the regulations regarding the offer and sale of securities in Wisconsin. In addition to the U4 and Form DOS300 forms, the issuer must also provide an undertaking indicating who will supervise the securities activities of the agent and outlining its program for instructing and monitoring the agent’s sales activities. A Sample Supervisory Undertaking Form DOS301 can be found here.
When the Form U4, the U4 Supplemental Form DOS300 and the undertaking have been completed, they should be sent along with the application fee of $80 per person and evidence of passing the appropriate product exam as well as the Series 63 Uniform Securities State Law examination (see Examinations section below) directly to the division. (Agent of the Issuer applications cannot be filed electronically via CRD.) Indicate in a cover letter the identity of the security issue that will be sold and whether the registration or exemption is pending or completed. If an exemption from registration is being relied upon for the security, that exemption should be identified regardless of whether an exemption filing is required or not.
The staff will verify that the issue is qualified for sale, that the application is complete and review the Agent of the Issuer application to confirm the applicant has passed the appropriate written examinations and there are no disclosure items of concern. If the issue has not been cleared for sale, the registration application will be held until such time as the issue has cleared. When the securities have been cleared for sale, the staff will issue a letter to the issuer identifying the applications approved, the effective date of that approval, and the Agent of the Issuer identification number.
An Agent of the Issuer may only represent one issuer at a time. If an issuer will be offering a series of similar investments, such as a series of limited partnerships or mutual funds, pursuant to Wis. Stat. s. 551(402)(6), an Agent of the Issuer does not need separate registrations for each issue of securities if the limited partnerships have the same general partner or the investment companies have the same investment adviser and an amendment is made to the agent’s application noting each specific series of security that will be offered.
The Financial Industry Regulatory Authority (FINRA) restructured its representative-level qualification examinations beginning October 1, 2018. The Wisconsin Division of Securities issued an Order Requiring Compliance with New FINRA Examination Requirements.
Every individual seeking to become registered as an Agent of the Issuer must pass the examinations prescribed in Wis. Admin. Code s. DFI-Sec 4.01(3) and the order requiring compliance with the new FINRA examination requirements. Everyone must pass the both the FINRA Securities Industry Essentials (SIE) examination and a FINRA representative-level examination. The registrant must also pass the North American Securities Administrators Association (NASAA) Uniform Securities Agent State Law (Series 63) examination or the NASAA Uniform Combined State Law Examiniation (Series 66) in conjunction with the General Securities Representative Examiniation (Series 7) or another product examination.
Series 7 General Securities Representative Examination
Series 6 Investment Company Products/Variable Contracts Representative Examination
Series 22 Direct Participation Programs Representative Examination
Series 52 Municipal Securities Representative Examination
Series 82 Private Placement Representative Examination
There are waivers from the examination requirement if:
- the applicant has passed an above required exam within two years prior to the date the application for registration was filed in this state;
- the applicant has been registered within two years prior to the date the application is filed in this state, as an agent or a broker-dealer under the securities law of another state as long as the other state where the applicant was registered required the Series 63 examination prior to that two year period;
- the issuer has submitted an undertaking satisfactory to the division setting forth how the applicant’s activities will be limited in this state and how the agent will be adequately supervised;
- the applicant has been registered under Wis. Stat. ch. 551 as an agent or broker-dealer within two years prior to the date the application is filed; or
- the applicant has received an order of the division, issued under conditions as the division may prescribe, waiving the requirement to take and pass one or more of the examinations.
FINRA administers all examinations at their computer testing sites. Reservations to take the exams by individuals not associated with a firm can apply through FINRA's Test Enrollment Services System (TESS)
. The division will not "sponsor" or otherwise authorize FINRA to permit an individual to take an exam prior to the filing of an application for registration with the division.
The division does not have forms nor does it have any information or scheduling ability with regard to these examinations. All inquiries should be directed to FINRA at 301-590-6500. Study guides for the Series 63 and 66 exams are available on the NASAA website
There are a number of private organizations that offer classroom or self-study courses for the exams. A list of these vendors is available on the NASAA website
. These vendors are not endorsed, recommended or rated by the division or NASAA.
Duration of Registration
An Agent of the Issuer registration is good for no more than one year. All Agents for Issuer registrations expire on December 31st of each year. However, if the sale of an issue is completed prior to December 31st, the issuer must withdraw the registration immediately after completion of the offering.
If the offering is continuous (such as an open-end mutual fund) or if the offering continues beyond December 31st, the issuer will receive a renewal notice in October with instructions on submitting a renewal application. Renewals are $80 per agent and are due by December 1st. Renewals received after December 1st will be assessed a late fee of $100 per agent. All registrations expire on December 31st if not properly renewed.
Phone: (608) 266-2139