1. (a) Filings made through CRD. Pursuant to Arkansas Code §§ 23-42-208 and 23-42-302 of the Arkansas Securities Act, Arkansas Code § 23-42-101 et seq., the Securities Commissioner designates the CRD to receive and store filings and collect related fees from broker-dealers and broker-dealer agents on behalf of the commissioner.

2. (b) Application.

   1. (1)

      1. (A) Each filing for initial and renewal registration shall be complete only if it contains the information set forth in Arkansas Code §§ 23-42-302 – 23-42-305 of the Arkansas Securities Act in the manner prescribed by the commissioner.
      2. (B) The requirements listed below are subject to change pursuant to Arkansas Code § 23-42-208 of the Arkansas Securities Act.

   2. (2) Broker-dealer applications. An applicant for initial broker-dealer registration shall:

      1. (A) Submit to the CRD a completed Form BD and Form BR designating Arkansas as a state in which the applicant requests to be registered, along with the fees set forth in Arkansas Code § 23-42-304 of the Arkansas Securities Act and any other fee required by FINRA; and
      2. (B) Submit the following to the commissioner:
3. (i)
4. (a) (a) Audited financial statements for the most recently ended fiscal year if the applicant has been in existence for twelve (12) months or more.

5. (b) (b) If the applicant has been in existence less than twelve (12) months and no audited financial statement has been prepared within thirty (30) days of filing the application, the most recent unaudited balance sheets certified as correct by the:

   1. (1) (1) President;
   2. (2) (2) Chief financial officer; or
   3. (3) (3) Similar executive officer.
6. (c) (c) All financial statements, unless otherwise permitted, shall be prepared in accordance with generally accepted accounting principles and practices.

7. (d) (d) All audited financial statements shall be prepared by an independent certified public accountant in accordance with generally accepted auditing standards and in conformity with generally accepted accounting principles;

   1. (ii) Proof of bonding coverage as prescribed by FINRA;

      1. (iii) Independent Contractor Acknowledgement Form acknowledging responsibility for registered agents, employees, and independent contractors; and

         1. (iv) Any other information deemed necessary by the commissioner to determine whether the applicant should be registered.

   2. (3) Agent applications.

      1. (A) Initial agent applications for a broker-dealer registered or to be registered with FINRA must be submitted directly to the CRD system and shall include the following:

         1. (i) Form U4;
         2. (ii) The initial agent registration fee as set forth in Arkansas Code § 23-42-304 of the Arkansas Securities Act and any other fee required by FINRA;
         3. (iii) Any attachments as required by the instructions on Form U4; and
         4. (iv) Compliance with the examination requirements of subsection (c) of this section.

      2. (B) Initial agent applications for an agent of an issuer must be submitted directly to the commissioner and shall include the following:

         1. (i) Form U4;
         2. (ii) The initial agent registration fee as set forth in Arkansas Code § 23-42-304 of the Arkansas Securities Act;
         3. (iii) Proof of processed Federal Bureau of Investigation fingerprint background check;
         4. (iv) A surety bond in the amount of twenty-five thousand dollars ($25,000);
         5. (v) Any attachments as required by the instructions on Form U4; and
         6. (vi) Submission of Form U10 in accordance with the form instructions and compliance with the examination requirements of subsection (c) of this section.

      3. (C) An application for registration as an agent of a broker-dealer or an agent of an issuer shall not be complete until the applicant has furnished, in addition to the requirements set forth in subdivision (b)(3) of this section, any other information not specifically required by the Arkansas Securities Act or this part that the commissioner may reasonably require, including, but not limited to, copies of any:

         1. (i) Litigation;
         2. (ii) Regulatory proceedings; and
         3. (iii) Customer complaints.

      4. (D)

         1. (i) Each applicant for registration as an agent of a broker-dealer or issuer shall as a part of his or her application be properly fingerprinted.
         2. (ii)
8. (a) (a) Any applicant subject to the fingerprinting requirements of the Securities Exchange Act of 1934, 15 U.S.C. § 78a et seq., shall submit to the CRD system a fingerprint card along with a fingerprint record transmittal form (both supplied by the CRD) which will be processed by the Federal Bureau of Investigation by the CRD system.

9. (b) (b) The applicant may be registered after submission of the fingerprint card and completion of all other registration requirements.

   1. (c) (c) Notification of the results of the processed card will be made available to the State Securities Department via the CRD system.

      1. (iii)
10. (a) (a) An agent of the issuer applicant shall submit an identification record request with fingerprints directly to the Federal Bureau of Investigation.

11. (b) (b) Proof of submission of the request with the Federal Bureau of Investigation and a copy of the results of the processed identification request shall be submitted directly to the commissioner.

    1. (4) Broker-dealer renewal applications.

       1. (A) An applicant for the renewal of a registration as a broker-dealer shall, prior to expiration of its current registration, submit to the CRD all appropriate amendments and fees.

       2. (B) No documents are required to be filed directly with the commissioner, however, the commissioner may request other information not specifically required by the Arkansas Securities Act or this part, including, but not limited to, copies of any:

          1. (i) Litigation;
          2. (ii) Regulatory proceedings; and
          3. (iii) Customer complaints.

    2. (5) Agent renewal applications.

       1. (A) Renewal registration of agents of a broker-dealer shall be submitted to the CRD along with the fee set forth in Arkansas Code § 23-42-304 of the Arkansas Securities Act and any other fee required by FINRA prior to expiration of registration.

       2. (B) For agents renewing registration with a broker-dealer, no documents are required to be filed directly with the commissioner, however, the commissioner may request other information not specifically required by the Arkansas Securities Act or this part, including, but not limited to, copies of any:

          1. (i) Litigation;
          2. (ii) Regulatory proceedings; and
          3. (iii) Customer complaints.

       3. (C) Renewal registration of agents of an issuer shall be submitted to the commissioner prior to the expiration of registration and shall include the following:

          1. (i) A completed Agent of the Issuer Renewal Application;
          2. (ii) The agent renewal registration fee as set forth in Arkansas Code § 23-42-304 of the Arkansas Securities Act;
          3. (iii) Proof of continued surety bond coverage;
          4. (iv) Any amendments to the documents on file; and
          5. (v) Any other information not specifically required by the Arkansas Securities Act or this part that the commissioner may reasonably require, including, but not limited to, copies of any:
12. (a) (a) Litigation;

13. (b) (b) Regulatory proceedings; and

    1. (c) (c) Customer complaints.

    2. (6) Additional exhibits or information not specifically required by the application but essential to a full presentation of all material facts relating to the applicant’s qualifications shall be furnished and properly identified.

       1. (c) Examination of agents and supervisors.
    3. (1) The commissioner requires that written examinations on general securities knowledge and state securities law be taken and passing scores achieved within a two-year period immediately preceding the filing date of the application before an applicant will be considered eligible for registration.

    4. (2) Agent.

       1. (A) An applicant to be an agent must achieve passing scores for the appropriate FINRA examinations.
       2. (B) FINRA rules effective October 1, 2018, require agents to pass the Securities Industry Essentials Exam (SIE) and a specialized knowledge exam appropriate to their job function.
       3. (C) Agent applicants must also pass the Series 63 or Series 66 exam that addresses state law.
       4. (D) Prior to October 2018, agents were required to pass a Series 7 or Series 1 exam along with an exam covering state law.

    5. (3) Limited agent.

       1. (A) Applicants successfully completing a limited knowledge examination will only be eligible for registration to effect transactions in those securities that were covered by the limited examination.
       2. (B) Applicants shall satisfy the state law examination requirement by passing the Series 63 or Series 66 examination and the knowledge requirement by passing at least one (1) limited knowledge securities examination.

    6. (4) Supervisor.

       1. (A) An agent designated as a supervisor must achieve passing scores for the appropriate FINRA examinations.
       2. (B) FINRA rules effective October 1, 2018, require agents to pass the SIE and a specialized knowledge exam appropriate to their job function.
       3. (C) Agent applicants must also pass the Series 63 or Series 66 exam that addresses state law.
       4. (D) Prior to October 2018, agents were required to pass the agent exams along with a Series 24 exam or the Series 9 and Series 10 exams combined with the Series 23 exam.
    7. (5) Limited supervisor. If the firm is limited in its scope of business and provides verification of the same to the commissioner, then at least one (1) agent designated as a limited supervisor must achieve passing scores for the appropriate FINRA examinations.
    8. (6) Any individual who has been registered as a general securities agent, general securities principal, or investment adviser representative in any state, commonwealth, territory, district, or province in the United States or Canada within the two (2) years immediately preceding the filing of an application and who has at any time in the past met the requirements of subsection (c) of this section shall not be required to repeat the examinations in order to become registered.

    9. (7) Solely in those cases where circumstances warrant because of the limited time, amount, nature of the issue or transaction involved, or the specific circumstances unique to the applicant, the commissioner may, upon petition and good cause shown by the applicant, waive any or all of the examination requirements set forth above.

       1. (d) Registration.
    10. (1) Upon completion of the application, compliance with the examination requirement, payment of the fees, and acceptance by the commissioner, initial registration will become effective.
    11. (2) For agents and broker-dealers filing an application as set forth in subsection (b) of this section, the commissioner will either accept the application or notify the applicant of the matters that need to be resolved.
    12. (3) Broker-dealers may access the registration status of the broker-dealer or agents through the CRD.

14. (e) Post-registration requirements.

    1. (1) Registered broker-dealers and agents shall file amendments to Form BD and Form U4 with the CRD in the manner required by the forms and the CRD.

    2. (2) Changes necessitating a filing shall include, but may not be limited to, the following:

       1. (A) Change in firm name, ownership, management, or control of a broker-dealer, or a change in any of its partners, officers, or persons in similar positions, or its business address, or the creation or termination of a branch office in Arkansas;
       2. (B) Change in type of entity, general plan or character of a broker-dealer’s business, method of operation, or type of securities in which the registrant is dealing or trading;
       3. (C) Insolvency, dissolution, liquidation, or a material adverse change or impairment of working capital, or noncompliance with the minimum capital or bond requirements hereinabove provided;
       4. (D) The filing of a criminal charge or civil action against a registrant, partner, or officer in which an alleged violation of a securities law, threats of violence against any person, dishonesty, wrongful taking of any property, or any manner of fraud is involved, and the result of any hearing, proceeding, or action in the matter, as well as any subsequent action taken on appeal by any reviewing agency or court;
       5. (E) The filing of a complaint or the commencement of a proceeding by an administrative agency, regulatory agency, self-regulatory agency, or court, or a written notice of intention to do so, to consider whether to deny, suspend, or revoke a registration, impose a fine or other penalty upon the registration, or to enjoin the registrant from engaging in or continuing any conduct or practice in the securities business, the results of the hearing or proceeding, as well as any subsequent actions taken by any reviewing agency or court; and
       6. (F) The registrant shall be deemed to have complied with immediate notification pursuant to this subsection if the information has been filed with CRD as soon as possible but in no event more than thirty (30) calendar days after the registrant has knowledge of the circumstances requiring the notification.
    3. (3) Any broker-dealer registered under the Arkansas Securities Act shall give timely notice to each agent registered with the broker-dealer of the results of any hearing or proceeding referred to in subdivision (e)(1) of this section to the extent the agent is required to disclose the matters on his or her application.

15. (f) Registration exemption for merger and acquisition brokers.

    1. (1) Except as provided in subdivisions (f)(2) and (3) of this section, a merger and acquisitions broker shall be exempt from registration pursuant to Arkansas Code § 23-42-301 of the Arkansas Securities Act.

    2. (2) Excluded activities. A merger and acquisition broker is not exempt from registration under this section if the merger and acquisition broker:

       1. (A) Directly or indirectly, in connection with the transfer of ownership of an eligible privately held company, receives, holds, transmits, or has custody of the funds or securities to be exchanged by the parties to the transaction;
       2. (B) Engages on behalf of an issuer in a public offering of any class of securities that is registered, or is required to be registered, with the United States Securities and Exchange Commission under Section 12 of the Securities Exchange Act of 1934, 15 U.S.C. § 78l or with respect to which the issuer files, or is required to file, periodic information, documents, and reports under 15 U.S.C. § 78o(d); or
       3. (C) Engages on behalf of any party in a transaction involving a public shell company.

    3. (3) Disqualifications. A merger and acquisition broker is not exempt from registration under this section if the merger and acquisition broker is subject to:

       1. (A) Suspension or revocation of registration under Section 15(b)(4) of the Securities Exchange Act of 1934, 15 U.S.C. § 78o(b)(4);
       2. (B) A statutory disqualification described in Section 3(a)(39) of the Securities Exchange Act of 1934, 15 U.S.C. § 78c(a)(39);
       3. (C) A disqualification under the rules adopted by the United States Securities and Exchange Commission under Section 926 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, 15 U.S.C. § 77d; or
       4. (D) A final order described in subdivision (4)(H) of Section 15(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78o(b)(4)(H).

    4. (4) Definitions. For the purposes of this section:

       1. (A)

          1. (i) “Control” means the power, directly or indirectly, to direct the management or policies of a company, whether through ownership of securities, by contract, or otherwise.
          2. (ii) There is a presumption of control for any person who:
16. (a) (a) Is a director, general partner, managing member, or manager of a limited liability company, or officer exercising executive responsibility (or has similar status or functions);

17. (b) (b) Has the right to vote twenty percent (20%) or more of a class of voting securities or the power to sell or direct the sale of twenty percent (20%) or more of a class of voting securities; or

    1. (c) (c) In the case of a partnership or limited liability company, has the right to receive upon dissolution, or has contributed, twenty percent (20%) or more of the capital;

       1. (B) “Eligible privately held company” means a company meeting both of the following conditions:

          1. (i) The company does not have any class of securities registered, or required to be registered, with the United States Securities and Exchange Commission under Section 12 of the Securities Exchange Act of 1934, 15 U.S.C. § 78l, or with respect to which the company files, or is required to file, periodic information, documents, and reports under Section 15(d) of the Securities Exchange Act of 1934, 15 U.S.C. § 78o(d); and
          2. (ii) In the fiscal year ending immediately before the fiscal year in which the services of the merger and acquisition broker are initially engaged with respect to the securities transaction, the company meets either or both of the following conditions (determined in accordance with the historical financial accounting records of the company):
18. (a) (a) The earnings of the company before interest, taxes, depreciation, and amortization are less than twenty-five million dollars ($25,000,000); and

19. (b) (b) The gross revenues of the company are less than two hundred fifty million dollars ($250,000,000);

    1. (C) “Inflation adjustment”.

       1. (i) On the date that is five (5) years after the date of the enactment of this section, and every five (5) years thereafter, each dollar amount in subdivision (f)(4)(B)(ii) of this section shall be adjusted by:
20. (a) (a) Dividing the annual value of the Employment Cost Index For Wages and Salaries, Private Industry Workers (or any successor index), as published by the Bureau of Labor Statistics, for the calendar year preceding the calendar year in which the adjustment is being made by the annual value of such index (or successor) for the calendar year ending December 31, 2019; and

21. (b) (b) Multiplying such dollar amount by the quotient obtained under this subdivision (f)(4)(C)(i).

    1. (ii) Rounding. Each dollar amount determined under subdivision (f)(4)(C)(i) of this section shall be rounded to the nearest multiple of one hundred thousand dollars ($100,000);

       1. (D) “Merger and acquisition broker” means any broker and any person associated with a broker engaged in the business of effecting securities transactions solely in connection with the transfer of ownership of an eligible privately held company, regardless of whether that broker acts on behalf of a seller or buyer, through the purchase, sale, exchange, issuance, repurchase, or redemption of, or a business combination involving, securities or assets of the eligible privately held company:

          1. (i) If the broker reasonably believes that upon consummation of the transaction, any person acquiring securities or assets of the eligible privately held company, acting alone or in concert, will control and, directly or indirectly, will be active in the management of the eligible privately held company or the business conducted with the assets of the eligible privately held company; and
          2. (ii) If any person is offered securities in exchange for securities or assets of the eligible privately held company, such person will, prior to becoming legally bound to consummate the transaction, receive or have reasonable access to the most recent fiscal year-end financial statements of the issuer of the securities as customarily prepared by its management in the normal course of operations and, if the financial statements of the issuer are audited, reviewed, or compiled, any related statement by the independent accountant, a balance sheet dated not more than one hundred twenty (120) days before the date of the exchange offer, and information pertaining to the management, business, results of operations for the period covered by the foregoing financial statements, and any material loss contingencies of the issuer; and

       2. (E) “Public shell company” means a company that at the time of a transaction with an eligible privately held company:

          1. (i) Has any class of securities registered, or required to be registered with the United States Securities and Exchange Commission under Section 12 of the Securities Exchange Act of 1934, 15 U.S.C. § 78l, or with respect to which the company files, or is required to file, periodic information, documents, and reports under Section 15(d) of the Securities Exchange Act of 1934, 15 U.S.C. § 78o(d);
          2. (ii) Has no or nominal operations; and
          3. (iii) Has:
22. (a) (a) No or nominal assets;

23. (b) (b) Assets consisting solely of cash and cash equivalents; or

    1. (c) (c) Assets consisting of any amount of cash and cash equivalents and nominal other assets.

Codification Notes: The Securities Exchange Act of 1934 is codified at 15 U.S.C. § 78a et seq. The Dodd-Frank Wall Street Reform and Consumer Protection Act is codified primarily at 12 U.S.C. § 5301 et seq.