A registered representative is a financial professional who works for a broker-dealer firm and is licensed to buy and sell securities on behalf of customers. You might know them as brokers or stockbrokers, but “registered representative” is the official industry term because these individuals must register with FINRA (the Financial Industry Regulatory Authority) and obtain state licenses before they can legally handle investment transactions.
What Registered Representatives Do
Registered representatives work within broker-dealer firms, which are companies in the business of buying and selling securities like stocks, bonds, and mutual funds. A registered representative may act as a broker (executing trades on your behalf) or as a dealer (trading from the firm’s own inventory), depending on the transaction. Their day-to-day work typically involves recommending investments, placing trades, opening accounts, and helping clients build portfolios that match their goals.
The scope of what a registered representative can sell depends on which licenses they hold. Someone with a general securities license can deal in a broad range of products, while someone with a more limited license might only be authorized to sell mutual funds or variable annuities. When you sit down with a broker, they should be able to tell you exactly which products they’re licensed to offer.
Licensing and Exam Requirements
Becoming a registered representative requires passing qualifying exams administered by FINRA. The most common path involves two tests: the Securities Industry Essentials (SIE) exam and the Series 7 exam, which together grant the General Securities Representative registration.
The SIE exam covers foundational knowledge about the securities industry and is open to anyone, but the Series 7 requires sponsorship from a FINRA member firm. In other words, you need a job (or a job offer) at a broker-dealer before you can even sit for the exam. The Series 7 itself consists of 125 multiple-choice questions, lasts 3 hours and 45 minutes, requires a score of 72% to pass, and costs $395.
Beyond these federal qualifications, most states require their own registration before a representative can do business with clients in that state. Representatives must also complete continuing education requirements to keep their licenses active. If a representative leaves the industry and their registration lapses, they generally need to re-qualify by passing the exams again.
The Standard of Conduct: Regulation Best Interest
Registered representatives operate under a rule called Regulation Best Interest (Reg BI), adopted by the SEC. This rule requires broker-dealers and their representatives to act in the best interest of retail customers and not put their own financial interests ahead of yours when making recommendations.
Reg BI breaks down into four obligations that the broker-dealer must satisfy:
- Disclosure: The firm must provide full and fair disclosure of all material facts about the relationship, including conflicts of interest tied to any recommendation.
- Care: The representative must exercise reasonable diligence, care, and skill when recommending an investment. That means understanding the potential risks, rewards, and costs of the product and weighing them against your specific financial situation.
- Conflict of interest: The firm must have policies to identify and mitigate conflicts that could push representatives toward recommendations that aren’t in your best interest.
- Compliance: The firm must maintain systems and procedures designed to enforce Reg BI across the organization.
These obligations apply to all types of account recommendations, including suggestions to roll over a workplace retirement plan into an IRA or to take a distribution from a retirement account. Reg BI also covers patterns of trading in your account, not just individual transactions, so a representative who churns your account with excessive trades can be held accountable even without controlling the account directly.
How They Differ From Investment Advisors
The financial industry has two main categories of professionals who help individuals invest: registered representatives (brokers) and investment adviser representatives (who work for registered investment advisers, or RIAs). The distinction matters because it affects how they’re paid, what services they provide, and what legal standard applies to their work.
Registered representatives typically earn commissions on the products they sell. When you buy a mutual fund or execute a trade through a broker, the broker earns a transaction-based fee. Investment advisers, by contrast, usually charge a fee based on a percentage of the assets they manage for you, or sometimes a flat or hourly rate. Advisers operate under a fiduciary duty, which is a continuous obligation to act in your best interest. Registered representatives operate under Reg BI, which applies specifically at the point of recommendation.
To make things more complicated, many financial professionals today are “dually registered,” meaning they hold both a broker registration and an investment adviser registration. When working with someone who wears both hats, it’s worth asking which capacity they’re acting in for any given transaction, because the services, costs, and applicable standards can differ. Both broker-dealers and SEC-registered investment advisers are required to give you a customer relationship summary (Form CRS) that spells out the services offered and their costs, making it easier to compare.
How to Verify a Registered Representative
FINRA maintains a free public database called BrokerCheck that lets you look up any registered representative who is currently registered or has been registered within the last 10 years. A BrokerCheck report includes several categories of information that can help you evaluate someone before handing over your money.
The report shows the representative’s current and past firm affiliations, their employment history for the past decade (including jobs outside the securities industry), and a list of their current licenses and registrations. Most importantly, it includes a disclosure section covering customer disputes, disciplinary actions, and certain criminal or financial matters on the individual’s record. Some disclosures may involve pending allegations that haven’t been resolved, so context matters.
Even after someone leaves the industry for more than 10 years, their record stays in BrokerCheck if they were the subject of a final regulatory action, convicted of certain crimes, subject to a civil injunction involving investment-related activity, or named in an arbitration or lawsuit alleging sales practice violations that resulted in an award or judgment against them. Running a quick BrokerCheck search before opening an account takes a few minutes and can surface red flags that save you from working with someone who has a troubling track record.