What is a Successor Registration?

A successor is an unregistered entity that assumes and continues the business of a registered broker-dealer or investment advisor, which then ceases its broker-dealer or advisory activities.  The provisions of the SEC Act of 1934 and the Investment Advisors Act of 1940 allow for the successor to operate without an interruption by filing a successor registration.  In general, this means that the successor may “use” the registrations of the predecessor until its own registration becomes effective, as long as an application for succession is filed within 30 days of the event.  The successor may also, in some cases, simply amend the predecessors Form BD or ADV, rather than file another application for registration.

In what cases would a successor registration apply to my firm?

The successor rules are designed to be used when there is a direct and substantial business connection between the predecessor and the successor.  This rule is not designed to allow BD’s and IA’s to sell the businesses, eliminate liabilities, transfer reps or transfer the registration of a shell organization.  The successor must assume substantially all of the assets and liabilities of the predecessors IA or BD business.

How do I know if I need to file a new membership application or simply amend my existing Form BD?

The successor rules permit the successor to file an amendment to the predecessor’s Form BD or ADV if there is a formal change in the structure or legal status of the BD or IA, but no practical change in the control or operations of the BD or IA.  Some examples are: 

1. Changing the form of organization or legal status, such as from a partnership to a corporation,  without changing the control of the BD or IA; or
2. A change in the composition of a corporate entity by death, withdrawal or inclusion of a partner that would result in dissolution of the entity under local law, but does not result in a change in control of the corporate entity.

Some examples of successions that would be required to file a new member application or CMA under NASD Rule 1017 are:

1. An unregistered entity purchasing or assuming substantially all of the assets and liabilities of a registered BD or IA.
2. The consolidation of two or more registered BD’s or IA’s into a new unregistered entity, which assumes substantially all of the assets and liabilities of the predecessor entities.
3. An instance where an entity registered as both a BD and IA wish to separate their services by transferring the BD or IA activities to a new unregistered entity.

If you have a specific situation or have questions about successor filings or changes to your corporate structure, please contact Lisa at 603-434-3594 ext. 114 or Laura Crosby-Brown at ext. 118.

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