Study guide
1.5 Exclusions from Definitions
Series 63 Uniform Securities Agent State Law
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1 Introduction
About the Series 63 Exam How to Use This Guide
2 Chapter 1: USA Definitions
1.1 Key Terms Overview 1.2 Definition of Person 1.3 Definition of Security 1.4 Offer and Sale 1.5 Exclusions from Definitions
3 Chapter 2: Registration of Persons
2.1 Broker-Dealer Registration 2.2 Broker-Dealer Exemptions and Exclusions 2.3 Agent Registration 2.4 Agent Exemptions and Exclusions 2.5 Investment Adviser and IAR Registration 2.6 IA and IAR Exemptions
4 Chapter 3: Registration of Securities
3.1 Registration Methods Overview 3.2 Registration by Coordination 3.3 Registration by Qualification 3.4 Registration by Filing (Notice Filing) 3.5 Exempt Securities and Transactions
5 Chapter 4: Fraudulent and Unethical Practices
4.1 Anti-Fraud Provisions 4.2 Prohibited Business Practices 4.3 Churning and Unauthorized Trading 4.4 Misrepresentation and Omissions 4.5 Market Manipulation 4.6 Insider Trading and Front-Running
6 Chapter 5: Administrative Provisions
5.1 State Administrator Powers 5.2 Investigations and Subpoenas 5.3 Administrative Orders 5.4 Cease and Desist and Injunctions 5.5 Criminal and Civil Penalties
1.5 Exclusions from Definitions
Key Takeaways Explain This Topic AI
Exclusions mean the definition does not apply at all.
Banks are excluded from BD and IA definitions; holding companies are not.
LATE professionals are excluded only if advice is incidental.
Broker-dealers are excluded from IA only without special compensation.
Out-of-state BDs can be excluded when dealing only with institutions.
Last updated: January 2026
Understanding who and what is excluded from key definitions is critical for the Series 63 exam. Remember: an exclusion means the person or entity doesn't meet the definition in the first place—they're completely outside the regulatory category.
Broker-Dealer Exclusions
The following are excluded from the broker-dealer definition and do NOT need to register as broker-dealers:
Persons Excluded from Broker-Dealer Definition
- Exclusion Reasoning
- Agents Individuals who represent broker-dealers
- Issuers Entities selling their own securities (not in the business of selling others')
- Banks and savings institutions Separately regulated by banking authorities
- Trust companies Regulated as financial institutions
- Persons with no place of business in the state Who deal only with broker-dealers or institutional investors
- Out-of-State Broker-Dealer Exclusion
A broker-dealer with no place of business in the state is excluded if they only transact with:
- Other broker-dealers
- Institutional investors (banks, insurance companies, investment companies)
- The issuer of securities involved in the transaction
- Existing customers who are temporarily in the state
Exam Tip: The key phrase is "no place of business in the state." If the broker-dealer has an office in the state, they must register regardless of who they transact with.
Agent Exclusions
The following individuals are excluded from the agent definition:
Persons Excluded from Agent Definition
- Exclusion Condition
- Individuals representing issuers In exempt transactions (no compensation based on transactions)
- Clerical/administrative staff Who do not effect securities transactions
- Partners, officers, directors If they don't effect transactions
- Issuer Transactions: Agent Exclusions
An individual representing an issuer is NOT an agent when selling:
Transaction Type Agent Registration Required?
- Exempt securities (government, bank securities) No
- Exempt transactions No
- Securities to employees (no commission) No
- Securities to existing shareholders (no commission) No
- Transactions with financial institutions No
Key Point: The exclusion often depends on whether the individual receives transaction-based compensation . If paid a commission or bonus for each sale, they're likely an agent.
Investment Adviser Exclusions
The following are excluded from the investment adviser definition:
Persons Excluded from IA Definition
- Exclusion Condition
- Banks and bank holding companies Including trust departments
- Lawyers, accountants, engineers, teachers If advice is solely incidental to their profession
- Broker-dealers If advice is solely incidental and no special compensation
- Publishers Of bona fide newspapers, magazines, or financial publications
- Federal covered advisers Registered with the SEC
- Persons with no place of business in the state Who advise 5 or fewer clients (de minimis rule)
- The "LATE" Professionals Exclusion
- L-A-T-E = Lawyers, Accountants, Teachers, Engineers
These professionals are excluded from the IA definition ONLY if:
- Investment advice is solely incidental to their profession
- They do NOT hold themselves out as investment advisers
- They do NOT receive special compensation for investment advice
- Professional Excluded? Why/Why Not
- CPA who occasionally mentions investments Yes Incidental to accounting practice
- CPA who advertises investment planning services No Holding out as IA
- Attorney managing client portfolios No Not incidental—primary service
- Teacher giving investment lectures Yes Incidental to teaching
- Broker-Dealer Exclusion from IA Definition
A broker-dealer is excluded from the IA definition if:
- Investment advice is solely incidental to their brokerage business
- They receive no special compensation for the advice
Special Compensation: Any fee or other consideration beyond normal commissions paid specifically for investment advice.
Publisher Exclusion
Publishers are excluded if their publication is:
- Bona fide (legitimate, not a front for investment advice)
- Of general and regular circulation (not targeted to specific individuals)
- Paid circulation (readers pay for the publication)
Publication Excluded?
- Wall Street Journal Yes
- Newsletter sent only to clients No
- Free tip sheet No
- Bloomberg financial news Yes
- Investment Adviser Representative (IAR) Exclusions
The following may be excluded from IAR registration:
- Exclusion Condition
- Clerical/administrative staff Who do not make recommendations or manage accounts
- Persons doing only impersonal advice No tailored recommendations
- Issuer Exclusions
There are no significant exclusions from the issuer definition. If an entity issues or proposes to issue a security, it is an issuer.
Summary: Registration Flow Chart
When analyzing whether someone must register, ask:
Do they meet the definition?
- If NO → Excluded, no registration needed
- If YES → Continue to step 2
Are they exempt from registration?
- If YES → Exempt, no registration needed (but anti-fraud rules apply)
- If NO → Must register
- Key Takeaways
- Exclusions mean the person/entity doesn't meet the definition at all
- Banks are excluded from both broker-dealer and investment adviser definitions
- LATE professionals (Lawyers, Accountants, Teachers, Engineers) are excluded if advice is solely incidental
- Broker-dealers are excluded from the IA definition if advice is incidental with no special compensation
- Out-of-state broker-dealers dealing only with institutions may be excluded
- Publishers of bona fide publications are excluded from the IA definition