On November 17, 2025, the staff of the Division of Trading and Markets (the “Staff”) of the U.S. Securities and Exchange Commission (“SEC”) issued no-action relief permitting a registered representative-owned personal services entity (“PSE”) to receive transaction-based compensation (“TBC”) without registering as a broker-dealer (“BD”) pursuant to Section 15(b) of the Securities Exchange Act of 1934 (“Exchange Act”), subject to specified conditions.  There is a line of SEC no-action letters and interpretative guidance that supports the notion that the mere receipt of TBC does not, on its own, require BD registration, particularly where commissions are routed through an affiliated non-registered entity solely for payroll and tax withholding purposes, and the non-registered entity does not solicit, execute, or negotiate securities transactions.  Other SEC no-action letters, however, treat receipt of TBC as dispositive, triggering BD registration.  This ambiguity has forced individuals and entities to navigate a maze of guidance to assess whether their circumstances fit within fact‑intensive, ad hoc exceptions the SEC has developed over decades.

In its determination, the Staff highlighted the following representations from the incoming letter:

  • The PSE will not solicit, execute, or negotiate securities transactions, nor engage in any other activities that would reasonably cause it to meet the definition of “broker” or “dealer” under Section 3(a)(4)(A) or Section 3(a)(5)(A) of the Exchange Act;
  • Supervision of the registered representatives’ (“RRs”) brokerage activities and of the BD’s brokerage business remains with the registered BD, which will retain authority over compensation determinations and payments to RRs; and
  • The SEC and applicable self-regulatory organizations (“SROs”) will have access to all books, records, and other information necessary for regulatory oversight of the BD, its RRs, and its business operations.

The incoming letter noted the following additional conditions, which should be considered by a PSE that proposes to rely on the relief:

  • The BD will maintain a bank account to pay TBC to its independent contractor RRs who are also employees or independent contractors of the PSE and associated with the BD;
  • The BD will instruct or otherwise approve the size and timing of TBC payments to each RR, retaining final discretion over such payments;
  • The PSE will promptly distribute TBC to RRs upon BD instruction, but may retain a portion for the PSE’s overhead and administrative expenses;
  • The BD will maintain records of all compensation payments to the PSE, including details of payments to each RR, in accordance with Exchange Act Rules 17a-3 and 17a-4;
  • Each RR and registered principal of the PSE will be registered with the same BD, and each owner of the PSE will be a registered person of the BD;
  • The PSE’s location will be designated as a branch office or Office of Supervisory Jurisdiction of the BD;
  • The BD will maintain policies and procedures to ensure compliance with these conditions; and
  • The BD and the PSE will enter into a written independent contractor servicing agreement delineating the parties’ obligations, responsibilities, and limitations, including the following:
    • The BD will have sole and exclusive control over the day-to-day securities-related activities of all of its associated persons;
    • The BD will be solely responsible for hiring, proper registration, licensing, training and supervision of all its registered representatives with respect to the BD’s obligations under all applicable securities laws, rules and regulations;
    • The BD will retain the exclusive right to discipline and terminate its associated persons;
    • All books and records of the PSE that are maintained on behalf of the BD will be made available for inspection by the SEC, any SRO or any other regulatory authority with jurisdiction over the BD’s business;
    • The BD will not assert that the existence of any agreement with the PSE in any way affects the ability of the SEC, any SRO, or any other relevant regulatory authority to regulate, examine or discipline the BD or any of its associated persons for violations of applicable securities laws;
    • The PSE will not engage in securities-related activities requiring BD registration, nor hold itself out as a BD;
    • Unregistered personnel employed by the PSE will not engage in securities-related activities that would require them to become RRs and will only perform clerical or ministerial functions; and
    • The PSE will not pay bonuses to unregistered personnel tied to TBC.