Zachary Nunn

Clarity for Compensation Act

This bill allows individuals who work for registered brokers to receive compensation for their services through their own personal businesses without having to register with the Securities and Exchange Commission (SEC). 

Specifically, the bill exempts certain personal services entities from SEC broker regulations.

As background, brokers (persons engaged in the business of making securities transactions on behalf of others) must register with the SEC and become members of a self-regulatory organization (SRO). Under this bill, a personal services entity is an entity established by a registered representative to receive compensation for services from the registered representative's broker. A registered representative works for the broker (deemed an associated person of the broker) and is registered with the appropriate SRO.

Under this bill, a personal services entity is not considered a broker for SEC regulatory purposes when receiving compensation from the registered representative's broker on the registered representative's behalf if

• the broker approves and maintains records of the payment,
• the personal services entity does not hold itself out as a broker or otherwise engage in broker or dealer activity,
• the broker exercises adequate supervision and control over the registered representative,
• the broker and personal services entity have a written agreement regarding their relationship and compensation arrangement, and
• the personal services entity is owned by the representative, the representative's family, or other similar entities.

The personal services entity must maintain certain records and make them available to the SEC and the appropriate SRO upon request.