A registered representative is a licensed professional who buys and sells securities for clients through a broker-dealer firm. Sometimes called stockbrokers or account executives, these individuals must pass qualifying exams, register with regulators, and follow conduct rules enforced by the Securities and Exchange Commission, the Financial Industry Regulatory Authority (FINRA), and state securities agencies. If you have a brokerage account, the person placing your trades and recommending investments is almost certainly a registered representative, and the rules below shape what they can sell you, how they must treat you, and what you can do if something goes wrong.
What a Registered Representative Actually Does
The core function is executing securities transactions. When you buy a stock, sell a bond, or invest in a mutual fund, a registered representative processes that order through their broker-dealer. They also review your portfolio, discuss your goals, and recommend investments they believe suit your situation. What they can sell depends on which license they hold. A representative with a general securities license can handle stocks, bonds, options, mutual funds, and variable annuities; a representative with a narrower license cannot.
Alongside order execution, representatives track market developments that affect your holdings and coordinate with their firm’s compliance and clearing departments so trades settle correctly and required disclosures reach you. For most retail investors, the registered representative is the primary human point of contact with the markets.
They Usually Cannot Trade Without Your Approval
Most brokerage accounts are non-discretionary, which means the representative must get your approval before each trade. A representative cannot make investment decisions on your behalf unless you sign a written authorization granting that specific power and the firm accepts the arrangement in writing.1Financial Industry Regulatory Authority. FINRA Rule 3260 – Discretionary Accounts Even with discretionary authority in place, the firm must promptly approve each discretionary order in writing. Trades placed without authorization are a fundamental violation, and that kind of activity shows up on a representative’s disciplinary record.
The Licenses Behind the Title
Becoming a registered representative involves two steps: passing exams and registering through a broker-dealer.
The first exam is the Securities Industry Essentials (SIE), a foundational test anyone can take without firm sponsorship. It covers basic industry concepts, product types and their risks, market structure, and regulatory functions.2Financial Industry Regulatory Authority. Securities Industry Essentials (SIE) Exam Passing the SIE alone does not make anyone a registered representative.
The second step requires firm sponsorship. To sit for a qualification exam like the Series 7 (the General Securities Representative exam), a candidate must be associated with a FINRA member firm. The Series 7 has 125 questions, a time limit of three hours and 45 minutes, and requires a score of 72 to pass.3Financial Industry Regulatory Authority. Series 7 – General Securities Representative Exam Holding both the SIE and Series 7 qualifies someone as a General Securities Representative, able to sell a broad range of investment products.
Series 6 vs. Series 7: Why It Matters to You
Not every representative holds a Series 7. The Series 6 license covers only investment company products, such as mutual funds, and variable contracts, such as variable annuities.4Financial Industry Regulatory Authority. Qualification Exams A Series 6 representative cannot sell you individual stocks, bonds, or options. If you ask your representative for something outside their license, they cannot execute it, so knowing which license they hold tells you what they can actually offer.
The Background Check
Formal registration begins when the sponsoring firm files Form U4, the Uniform Application for Securities Industry Registration or Transfer, through FINRA’s Central Registration Depository.5Financial Industry Regulatory Authority. Form U4 Filing requires fingerprinting and detailed disclosures about criminal history, financial issues such as bankruptcies or unpaid judgments, and any prior regulatory actions.6Financial Industry Regulatory Authority. Form U4 – Uniform Application for Securities Industry Registration or Transfer Firms must also register the individual in every state where they will do business.7Financial Industry Regulatory Authority. Register a New Candidate
Certain events in someone’s background trigger a statutory disqualification that effectively blocks them from working in the securities industry. Under Section 3(a)(39) of the Securities Exchange Act, disqualifying events include all felony convictions within the past ten years, certain investment-related misdemeanor convictions (those involving investments, fraud, false statements, bribery, perjury, forgery, or similar conduct), court injunctions related to securities activity, and bars or expulsions ordered by the SEC or a self-regulatory organization.8Financial Industry Regulatory Authority. Statutory Disqualification Codes> A firm can apply to associate with a statutorily disqualified individual, but approval is rare.
The Standard That Governs Advice to You
The rules that govern how a registered representative treats you are the part of this framework you can actually use.
Regulation Best Interest
The primary standard for recommendations to retail customers is Regulation Best Interest. Under this SEC rule, a broker-dealer or its associated person making a recommendation must act in the retail customer’s best interest and cannot place their own financial interest ahead of the customer’s.9eCFR. 17 CFR 240.15l-1 – Regulation Best Interest The obligation has four components: a disclosure obligation covering material facts about the relationship and conflicts of interest; a care obligation requiring reasonable diligence and skill; a conflict of interest obligation requiring written policies to address conflicts; and a compliance obligation requiring the firm to enforce all of the above.
One nuance worth understanding. Reg BI applies specifically to recommendations to “retail customers,” meaning natural persons (or their legal representatives) who use the recommendation primarily for personal, family, or household purposes. Recommendations to institutions, pension funds, or business entities fall under FINRA’s separate suitability rule, which requires recommendations to be suitable based on the customer’s profile but does not carry the “best interest” framing.10Financial Industry Regulatory Authority. Regulatory Notice 20-18
Form CRS: The Relationship Summary
Every broker-dealer working with retail investors must deliver a plain-language relationship summary called Form CRS. For broker-dealers, delivery must happen before or at the earliest of: making a recommendation, placing an order, or opening a brokerage account.11U.S. Securities and Exchange Commission. Form CRS Investment advisers have a parallel requirement, delivering Form CRS before or when entering into an advisory contract.12eCFR. 17 CFR 275.204-5 – Delivery of Form CRS The document is short by design. It describes the firm’s services, fees, conflicts of interest, and disciplinary history. Read it.
How Your Representative Gets Paid
Compensation shapes advice. Most registered representatives at broker-dealers earn commissions on each transaction they execute, which creates an incentive to recommend products that generate more revenue for the representative and the firm.
Representatives may also receive ongoing compensation through 12b-1 fees, asset-based charges embedded in mutual fund expenses. FINRA defines these as ongoing sales charges or service fees, and firms cannot accept them unless the arrangement is disclosed in the fund’s prospectus. When recommending any mutual fund, representatives must disclose all material information, including expenses, sales charges, investment objectives, and risks.13Financial Industry Regulatory Authority. Mutual Funds
Reg BI’s conflict of interest obligation requires firms to have written policies addressing these scenarios, but policies on paper and behavior in practice do not always match. Asking your representative directly how they are compensated on a specific recommendation is fair game.
Conduct That Should Raise a Flag
A few categories of prohibited conduct come up often enough that a client can recognize them.
Churning
Churning is excessive buying and selling in an account primarily to generate commissions rather than to serve the client’s investment goals. Whether trading is excessive depends on the character of the account, the customer’s stated objectives, their investment profile, and their financial resources. Churning violates federal securities law under the antifraud provisions of Section 10(b) of the Securities Exchange Act.
Selling Away
Selling away happens when a representative participates in a securities transaction outside their firm’s regular business. FINRA Rule 3280 requires representatives to give written notice to their firm before participating in any private securities transaction, describing the deal, their role, and any expected compensation.14Financial Industry Regulatory Authority. FINRA Rule 3280 – Private Securities Transactions of an Associated Person If compensation is involved, the firm must approve or disapprove in writing. If the firm says no, the representative cannot participate. Unauthorized private deals brought to you by your representative are a warning sign.
Outside Business Activities
Even non-securities activities can create problems. A registered person who takes outside employment, serves as an officer or director of another company, or receives compensation from any outside business must give prior written notice to their firm.15Financial Industry Regulatory Authority. FINRA Rule 3270 – Outside Business Activities of Registered Persons The firm evaluates whether the activity could interfere with the representative’s duties or confuse the public into thinking the outside activity is part of the firm’s business, and can impose conditions, restrict the activity, or prohibit it.
Sanctions for violations range from fines and suspensions to permanent bars from the industry. FINRA’s general principle is that misconduct serious enough to warrant a suspension longer than two years probably warrants a permanent bar instead, and conversion of customer funds carries a bar as the standard sanction regardless of amount.16Financial Industry Regulatory Authority. Sanction Guidelines
Who Oversees Registered Representatives
Three layers of authority. The Securities and Exchange Commission is the federal regulator with broad authority over the securities industry, writes the rules, brings enforcement actions for major fraud, and oversees the self-regulatory organizations.17U.S. Securities and Exchange Commission. About the SEC FINRA is the primary self-regulatory organization for broker-dealers and their registered representatives. It operates as a non-governmental entity under SEC supervision, writes and enforces its own rulebook, examines member firms, and runs the licensing and registration system through the Central Registration Depository. State securities regulators add the third layer, requiring registration in each state where a representative conducts business and running their own investigations and enforcement actions.
How to Check a Specific Representative
Before opening an account or acting on a recommendation, look the person up. FINRA’s BrokerCheck tool is free. Enter a name or CRD number and you can see employment history for the past ten years (inside and outside the securities industry), every license currently held, and any disclosure events on their record.18Financial Industry Regulatory Authority. About BrokerCheck Disclosure events include customer disputes, regulatory actions, and certain criminal and financial matters. Some entries reflect pending allegations that have not been resolved, so context matters when reading a report.
After a representative leaves the industry, BrokerCheck keeps the record for ten years. After that, they remain in the system only if they were subject to a final regulatory action, certain criminal convictions, a civil injunction involving investment activity, or an arbitration award or civil judgment for a sales practice violation.18Financial Industry Regulatory Authority. About BrokerCheck
If the person is also registered as an investment adviser, the SEC’s Investment Adviser Public Disclosure database provides parallel information, including Form ADV filings, registration status, and disciplinary history.19Investor.gov. Investment Adviser Public Disclosure (IAPD) Checking both databases takes a few minutes and can surface problems your representative would not mention on their own.
If You Have a Complaint
If a registered representative has acted improperly with your account, FINRA operates a dispute resolution process that handles most customer complaints against broker-dealers and their representatives. You can file an arbitration claim by submitting a statement of claim, a submission agreement, and a filing fee through FINRA’s online portal.20Financial Industry Regulatory Authority. File an Arbitration or Mediation Claim Most brokerage account agreements contain a pre-dispute arbitration clause, which typically makes FINRA arbitration the required path rather than a lawsuit in court.
Mediation is available as a voluntary alternative. Either party can request it at any point, including after arbitration is filed, but both sides must agree to participate.20Financial Industry Regulatory Authority. File an Arbitration or Mediation Claim Move promptly. Waiting can create statute of limitations problems, and the details of what happened in your account are easier to document while the record is fresh.