Memorandum For Broker Dealers Registered Or Applying To Be Registered In The State Of Arkansas Template printable pdf download

MEMORANDUM

TO:

ALL BROKER DEALERS REGISTERED OR APPLYING TO BE

REGISTERED IN THE STATE OF ARKANSAS

FROM:

ARKANSAS SECURITES DEPARTMENT

RE:

INDEPENDENT CONTRACTORS

DATE:

JULY 9, 1997

______________________________________________________________

It has come to the attention of this Department that certain broker-dealers are attempting to classify their

salespersons as "independent contractors". The Department is concerned that such salespersons have failed

to properly register as broker-dealers and that the broker-dealers with which these salespersons are

associated may believe that they do not have the supervisory duties and liabilities normally applicable. In

an effort to forestall regulatory proceedings concerning this subject, the Department is hereby making

known its position concerning "independent contractors".

The Arkansas Securities Act, Ark. Code Ann. § 23-42-301 et seq. (the "Act"), provides that it is unlawful

for any person to transact business in this state as a broker-dealer or agent unless he is registered under the

Act. "Broker-dealer" is defined in § 23-42-102(3) as any person engaged in the business of effecting

transactions in securities for the account of others or for his own account. Certain exceptions are then set

forth, none of which include "independent contractors". "Agent" is defined in § 23-42-102(2) as any

individual other than a broker-dealer who represents a broker-dealer or issuer in effecting or attempting to

effect purchases or sales of securities. This definition is followed by certain exceptions which do not

include "independent contractors".

Under those sections cited above, any person who sells or offers securities or effects securities transactions

for someone other than himself must be registered as a broker-dealer or an agent. These two classifications

encompass all persons who may legally purchase or sell securities for other persons. Nowhere in the Act is

there a definition of the term "independent contractor" or an exception provided for such. Therefore, any

person who sells or purchases securities for another person unless he is a broker-dealer or comes within one

of the other exceptions set for in § 23-42-102(2), must be registered as an agent. Since by definition, an

agent represents a broker-dealer in effecting securities transactions, any attempt to classify an agent as an

"independent contractor" is without effect under the Act unless the "independent contractor" is registered as

a broker-dealer. By sponsoring an agent and signing the agent’s Form U-4, a broker-dealer agrees to be

responsible for any acts of the agent in connection with the offer, purchase or sale of securities, which may

include acts which the broker-dealer considers to be outside the scope of the agent’s employment.

Therefore, the position of the Arkansas Securities Department is as follows:

THE RELATIONSHIP OF "INDEPENDENT CONTRACTOR" BETWEEN A BROKER-DEALER AND

AN AGENT IS NOT RECOGNIZED UNDER ARKANSAS SECURITIES ACT. ANY PERSON

SPONSORED BY A BROKER-DEALER AS AN AGENT IS A REPRESENTATIVE OF THE

BROKER-DEALER IN THE OFFER, PURCHASE, OR SALE OF SECURITIES FOR CIVIL AND

REGULATORY PURPOSES, REGARDLESS OF ANY AGREEMENT BETWEEN THE BROKER-

DEALER AND THE AGENT PURPORTING TO LIMIT THE LIABILITY OF THE BROKER-DEALER

AND CLASSIFY THE AGENT AS AN "INDEPENDENT CONTRACTOR".

Please feel free to contact this Department if you have any questions.

Memorandum For Broker Dealers Registered Or Applying To Be Registered In The State Of Arkansas Template

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