Current through all regulations passed and filed through September 16, 2024
(A) License application. The license
application specified in section
1707.15 of the Revised Code
shall consist of:
(1) A completed form BD of
the securities and exchange commission submitted to the division through the
central registration depository, or CRD, maintained by the "Financial Industry
Regulatory Authority." Dealers not affiliated with the "Financial Industry
Regulatory Authority" must submit a paper form BD to the division;
(2) The license fee required by division
(B)(1) of section 1707.17 of the Revised Code;
and
(3) In the event that an
application for a securities dealer license has been pending for more than one
hundred and eighty days and the applicant has failed to correct outstanding
deficiencies, the division may terminate the application through the
CRD.
(B) License exam
requirements for securities dealer license. As a continuing condition of
licensing, every dealer and every applicant for licensing as a dealer shall
furnish evidence satisfactory to the division that a natural person
who is
identified on Schedule A of form BD has passed an examination listed in
this paragraph establishing knowledge of securities laws and practices. Every
dealer which is not a natural person shall notify the division of the name and
relationship to the dealer of the natural person identified on Schedule A of form BD who has passed an
approved examination on behalf of the dealer and who will serve as the
designated principal on behalf of the dealer. The division shall consider a
dealer or an applicant for licensing as a dealer to have met this requirement,
if the dealer, applicant or a designated principal of the dealer or applicant
has:
(1) Been continuously licensed as a
dealer of securities by the division since May 1, 1991, or
(2) Achieved a passing score on one of the
following examinations administered by the Financial Industry Regulatory
Authority":
(a) Registered options principal,
series 4,
(b) General securities
principal, series 24,
(c)
Investment company and variable contracts products principal, series
26,
(d) Direct participation
programs principal, series 39,
(e)
Municipal securities principal, series 53, or
(f) "Uniform Combined State Law Exam," series
66.
(C)
Records of dealer
Every dealer licensed in this state that files any report or
document required under rules adopted pursuant to section 15 of the Securities
Exchange Act of 1934, 48 Stat. 881, 15 U.S.C. 78 o, as amended, and section 17
of the Securities Exchange Act of 1934, 48 Stat. 881, 15 U.S.C. 78 q, as
amended, shall promptly furnish to the division, upon request by the division,
legible, true and complete copies of those reports and documents. The division,
in its discretion, may examine the books and records of any licensed dealer or
any applicant for a dealer's license.
(D) Branch offices
(1) Dealers shall file a uniform form BR for
each new and existing branch office through the CRD. A form BR is considered
filed with the division upon acceptance by the CRD.
(2) Dealers shall amend applicable forms U4
through the CRD to assign any securities salespersons working in existing
branch offices, to the offices from which they work, and to record the
termination of securities salespersons.
(3) Dealers shall use the CRD to promptly
file with the division updates and amendments to forms BR, U4, and
U5.
(4) Dealers not affiliated with
the "Financial Industry Regulatory Authority" shall file paper forms BR, U4 and
U5 with the division.
(E) Notice of change of dealer information
Whenever there is any change in the principals, partners,
officers or directors of a dealer, or any other material change from the
information appearing on the original application or most recent license
renewal of a dealer, the dealer shall, within thirty calendar days, notify the
division in writing of the change, or changes, and shall keep a record of the
change or changes. Dealers affiliated with the Financial Industry Regulatory
Authority" shall submit changes to the division on the form BD through the
central registration depository and dealers not affiliated with the "Financial
Industry Regulatory Authority" shall submit changes to the division on a paper
form BD.
(F) Notice
required upon discontinuance of a salesperson's employment.
(1) Upon the resignation or discharge of a
salesperson, the dealer employing such salesperson shall, within thirty
calendar days, deliver to the division a request to cancel the license of the
salesperson. The request shall be made on form U-5, "Uniform Termination Notice
for Securities Industry Registration." Dealers affiliated with the "Financial
Industry Regulatory Authority" shall submit the form U-5 to the division
through the central registration depository. Dealers not affiliated with the
"Financial Industry Regulatory Authority" shall submit changes to the division
on a paper form U-5.
(2) Except as
hereinafter provided, a request to cancel the license or withdraw the license
application of a salesperson shall become effective on the sixtieth day after
the filing thereof with the division, or within such shorter period of time as
the division may determine. If, prior to the effective date of a request to
cancel the license or withdraw the license application of a salesperson, the
division has instituted a proceeding to suspend or revoke the license, or deny
or refuse the license application of the salesperson, the request to cancel the
license or withdraw the license application of a salesperson shall not become
effective except at such time and upon such terms and conditions as the
division deems necessary or appropriate in the public interest or for the
protection of investors.
(G) Withdrawal. Except as hereinafter
provided, a notice to withdraw from licensure as a dealer shall become
effective on the sixtieth day after the filing thereof with the division, or
within such shorter period of time as the division may determine. If, prior to
the effective date of a notice of withdrawal from licensure as a dealer, the
division has instituted a proceeding to suspend, revoke, deny or refuse the
license of the dealer, the notice of withdrawal shall not become effective
except at such time and upon such terms and conditions as the division deems
necessary or appropriate in the public interest or for the protection of
investors.
(H) Sale of securities
on bank premises.
(1) Applicability.
Paragraphs (H)(1) to (H)(4) of this rule shall apply exclusively to
broker-dealer services conducted by dealers on the premises of a bank where
retail deposits are taken. Paragraph (H) of this rule does not alter or
abrogate a dealer's obligations to comply with other applicable laws, rules, or
regulations that may govern the operations of dealers and their salespersons,
including but not limited to, supervisory obligations. These rules do not apply
to broker-dealer services provided to non-retail customers.
(2) Definitions. For purposes of paragraphs
(H)(1) to (H)(4) of this rule, the following terms have the meanings indicated:
(a) "Bank" means any bank, trust company,
savings and loan association, savings bank, or credit union that is
incorporated or organized under the laws of the United states, any state of the
United States, Canada, or any province of Canada and that is subject to
regulation or supervision by that country, state, or province, that is located
in this state, and the service corporations located in this state of such bank,
trust company, savings and loan association, savings bank, or credit
union.
(b) "Networking arrangement"
means a contractual or other arrangement between a dealer and a bank pursuant
to which the dealer conducts broker-dealer services on the premises of the bank
where retail deposits are taken.
(c) "Broker-dealer services" means the
investment banking or securities business carried on by a broker, dealer or
municipal securities dealer, other than a bank or department or division of a
bank, or government securities broker or dealer, of underwriting or
distributing issues of securities, or of purchasing securities and offering the
same for sale as a dealer, or of purchasing and selling securities upon the
order and for the account of others.
(3) Standards for dealer conduct. No dealer
shall conduct broker-dealer services on the premises of a bank where retail
deposits are taken unless the dealer complies initially and continuously with
the following requirements:
(a) Setting.
Wherever practical, broker-dealer services shall be conducted in a physical
location distinct from the area in which the bank's retail deposits are taken.
In all situations, the dealer shall identify its services in a manner that
clearly distinguishes those services from the bank's retail deposit-taking
activities. The dealer's name shall be clearly displayed in the area in which
the dealer conducts its broker-dealer services.
(b) Networking arrangements shall be governed
by a written agreement that sets forth the responsibilities of the parties and
the compensation arrangements. Networking arrangements must provide that
supervisory personnel of the dealer and representatives of state securities
authorities, where authorized by state law, will be permitted access to the
bank's premises where the dealer conducts broker-dealer services in order to
inspect the books and records and other relevant information maintained by the
dealer with respect to its broker-dealer services. The dealer shall be
responsible for ensuring that the networking arrangement clearly outlines the
duties and responsibilities of all parties.
(c) Customer disclosure and written
acknowledgment.
(i) Subject to paragraph
(H)(4) of this rule, at or prior to the time that a customer's securities
brokerage account is opened by a dealer on the premises of a bank where retail
deposits are taken, the dealer shall:
(a)
Disclose, orally and in writing, that the securities products purchased or sold
in a transaction with the dealer:
(i) Are not
insured by the federal deposit insurance corporation;
(ii) Are not deposits or other obligations of
the bank and are not guaranteed by the bank; and
(iii) Are subject to investment risks,
including possible loss of the principal invested.
(b) Make reasonable efforts to obtain from
each customer during the account opening process a written acknowledgment of
the disclosures required by paragraph (H)(3)(c)(i)(a) of this rule.
(ii) If broker-dealer services
include any written or oral representations concerning insurance coverage,
other than federal deposit insurance corporation insurance coverage, then clear
and accurate written or oral explanations of the coverage must also be provided
to the customers when such representations are first made.
(d) Communications with the public.
(i) Confirmations, advertisements and
recommendations:
(a) All of the dealer's
confirmations and account statements must indicate clearly that the
broker-dealer services are provided by the dealer.
(b) Subject to paragraph (H)(4) of this rule,
advertisements and sales literature that announce the location of a bank where
broker-dealer services are provided by the dealer, or that are distributed by
the dealer on the premises of a bank, must disclose that securities products:
(i) Are not insured by the federal deposit
insurance corporation;
(ii) Are not
deposits or other obligations of the bank and are not guaranteed by the bank;
and
(iii) Are subject to investment
risks, including possible loss of the principal invested. The shorter, logo
format described in paragraph (H)(3)(d)(ii)(a) of this rule may be used to
provide these disclosures.
(c) Recommendations by a dealer concerning
non-deposit investment products with a name similar to that of the bank must
only occur pursuant to a sales program designed to minimize the risk of
customer confusion.
(ii)
Logo format disclosures:
(a) Subject to
paragraph (H)(4) of this rule, the following shorter, logo format disclosures
may be used by a dealer in advertisements and sales literature, including
material published, or designed for use, in radio or television broadcasts,
automated teller machine screens, billboards, signs, posters and brochures, to
comply with the requirements of paragraph (H)(3)(d)(i)(b) of this rule,
provided that such disclosures are displayed in a conspicuous manner:
(i) Not FDIC insured;
(ii) No bank guarantee; and
(iii) May lose value.
(b) As long as the omission of the
disclosures required by paragraph (H)(3)(d)(i)(b) of this rule would not cause
the advertisement or sales literature to be misleading in light of the context
in which the material is presented, such disclosures are not required with
respect to messages contained in:
(i) Radio
broadcasts of thirty seconds or less;
(ii) Electronic signs, including
billboard-type signs that are electronic, time, and temperature signs and
ticker tape signs, but excluding messages contained in such media as
television, on-line computer services, or automated teller machines;
and
(iii) Signs, such as banners
and posters, when used only as location indicators.
(e) Notification of
termination. The dealer must promptly notify the bank if any salesperson of the
dealer who is employed by the bank is terminated for cause by the
dealer.
(4) If paragraph
(H) of this rule requires a dealer to disclose that securities products are not
insured by the federal deposit insurance corporation, and the dealer is
providing broker-dealer services on the premises of a bank with deposits
insured by a program other than the federal deposit insurance corporation, the
dealer shall instead disclose that the securities products purchased or sold in
a transaction with the dealer are not insured by the other deposit insurance
program.
(I) Financial
statements.
A dealer not affiliated with the "Financial Industry Regulatory
Authority" shall submit to the division, within ninety days of the end of its
fiscal year, a manually signed and duly verified duplicate of the current
fiscal year end report required by
17 C.F.R.
240.17a-5, as amended.
(J) Prior to the use or operation of any
principal office or branch office in this state, each dealer not affiliated
with the Financial Industry Regulatory Authority" shall designate a natural
person licensed as a dealer or salesperson in Ohio as the supervisor of that
office and report in writing to the division on the form BR the location of all
branch offices as defined in paragraph (F) of rule
1301:6-3-01 of the
Administrative Code.
(1) Every salesperson
shall be assigned by the dealer to the dealer's principal office location in
Ohio or to a branch office of the dealer in Ohio.
(2) Each person designated by a dealer as a
supervisor or a principal or branch office in Ohio after December 31, 1991
shall, unless waived in advance in writing by the division for good cause
shown, have been licensed as a securities dealer or salesperson by Ohio or any
other state for at least two years and shall have good business repute as that
term is defined in paragraph (D) of rule
1301:6-3-19
of the Administrative Code.
Effective: 9/26/2015
Five Year
Review (FYR) Dates: 06/08/2015 and
06/08/2020
Promulgated
Under: 119.03
Statutory
Authority: 1707.20
Rule
Amplifies: 1707.15
Prior
Effective Dates: 12/31/75; 8/3/78; 6/23/81; 9/8/82; 10/26/84; 8/5/85; 5/9/86;
9/1/87; 1/17/92; 7/3/93; 2/7/97; 3/18/99; 7/29/99; 5/25/00; 11/27/00; 11/5/01;
6/12/03; 11/25/04; 7/3/06; 8/5/07,
1/15/09
