Updated 2026

What Can a Registered Representative Do?

The Complete SIE Exam Guide to RR Rules

SIE test-takers consistently report being blindsided by questions about what an RR can and can't do. This guide covers every testable scenario — registered vs. non-registered persons, prohibited activities, conditional permissions, registration rules, and the key numbers you need to memorize.

Why this guide exists: Three Reddit posts from a single weekend all independently said the same thing: "LOTSSS of RR questions," "topics such as what RR can do that I wasn't prepared for," and "a lot of regulations and RR can and can'ts." If your prep materials glossed over this, you're not alone. This is everything they should have taught you. Updated for the 2026 FINRA SIE Exam including the new $300 gift limit (effective March 30, 2026). Published by 2DollarTests.
🏷️

Registered vs. Non-Registered Persons

Section 1 of 8 · The boundary that defines everything else
What Makes Someone a "Registered Representative"?
A registered representative (RR) is an associated person of a FINRA member firm who is registered to engage in the securities business. They have passed the required qualification exams (SIE + a top-off exam like the Series 7), filed Form U4 through their firm, and are subject to FINRA rules and supervision. The term "registered representative" and "agent" are often used interchangeably on the SIE.

✅ Registered Persons CAN

  • Solicit customers and prospects
  • Recommend securities
  • Take and execute customer orders
  • Discuss product features, risks, and suitability
  • Receive transaction-based compensation (commissions)
  • Provide investment advice within registration scope

🚫 Non-Registered Persons CANNOT

  • Solicit customers or discuss investments
  • Recommend or suggest any security
  • Take orders from customers
  • Discuss product features or suitability
  • Receive commissions or transaction-based pay
  • Prequalify customers on finances or objectives
What Non-Registered Persons CAN Do
Clerical Only
Non-registered persons are limited to clerical and ministerial functions. Specifically, they may: send invitations to firm-sponsored events, call potential customers to ask if they want to receive investment literature, and ask if they want to speak with a registered representative. That's it. The moment they start discussing products, features, or suitability, they've crossed the line.
⚠️
Common Exam Trap
The exam loves presenting a scenario where a non-registered assistant "helps out" during a busy period. No matter how innocent it sounds — if they take an order, discuss product characteristics, or prequalify a prospect, the answer is always that this is not permitted under any circumstances. The exam will offer tempting answer choices like "Yes, as long as no sales occur" — don't fall for it.
Quick Check
A non-registered assistant calls a list of potential clients and asks each one whether they'd be interested in learning about the firm's new mutual fund offerings. Is this permitted?
No — not permitted.
Asking about interest in specific products is solicitation. A non-registered person may only ask if someone wants to receive literature or speak with a registered representative — they cannot discuss or promote specific products.
✅

What a Registered Representative CAN Do

Section 2 of 8 · The permitted activities and their limits
Solicit and Recommend
An RR may actively solicit new business, cold call (within telemarketing rules), recommend securities, and provide investment advice — provided the recommendation is suitable for the customer based on their investment profile (Reg BI / FINRA Rule 2111). All recommendations must be in the customer's best interest.
Execute Trades
RRs can take and execute customer orders for any security they are registered to transact. They can act as agent (executing on behalf of the customer, earning a commission) or their firm can act as principal/dealer (trading from firm inventory, earning a markup/markdown). Both roles must be disclosed on the trade confirmation.
Receive Compensation
RRs can receive commissions, markups, and other transaction-based compensation — but only through their employing firm. An RR cannot receive compensation directly from a customer or from another firm. Even in military service, an RR on special inactive status may continue receiving compensation from existing client transactions (trailing commissions).
Open and Manage Customer Accounts
RRs can open new customer accounts (with required information: name, address, date of birth, SSN/Tax ID, employment, investment objectives, risk tolerance, and financial status). They can service accounts, respond to customer inquiries, and manage the ongoing relationship — all under the supervision of a principal.
Exercise Discretion (With Authorization)
An RR can exercise time and price discretion on a trade without written authorization — for example, if a customer says "buy 100 shares of AAPL today" and the RR decides when and at what price to enter the order. However, full discretion (choosing what to buy/sell, how much, and when) requires written authorization from the customer, acceptance by the firm, and principal review of discretionary transactions.
💡 Time and price = no written authorization needed. Asset, action, or amount = written discretion required.
🚫

What a Registered Representative CANNOT Do

Section 3 of 8 · The prohibited activities — the heart of SIE RR questions
Guarantee Against Loss
Always Prohibited
An RR cannot guarantee a customer against losses or promise a specific rate of return. This includes offering to personally buy back shares if they drop in value. It doesn't matter if the customer asks for it or if the RR has good intentions — guarantees are always prohibited.
Unauthorized Trading
Always Prohibited
Executing trades in a customer's account without their knowledge or authorization is prohibited — even if the trade turns out to be profitable. Good results do not cure a process violation. Every trade requires customer authorization unless the RR has written discretionary authority.
Churning (Excessive Trading)
Always Prohibited
Trading excessively in frequency or size to generate commissions rather than to benefit the customer is churning. Profitability does not make it acceptable — the only mitigating factor is if the customer has a short-term trading objective. The exam looks at turnover rate, cost-to-equity ratio, and whether the RR controlled the account.
Selling Away (Private Securities Transactions)
FINRA Rule 3280
An RR cannot participate in a securities transaction outside the scope of their firm without providing written notice. If compensation is involved, the firm must approve or disapprove in writing and supervise the transaction. Conducting securities business "off the books" without firm knowledge is called selling away and is a serious violation.
Front Running
Always Prohibited
An RR who knows a large customer order is about to be entered cannot enter a personal order ahead of it to profit from the expected price movement. Similarly, trading ahead — entering personal trades before a research report is published — is prohibited. Both exploit non-public information about pending order flow.
Insider Trading
Always Prohibited
Trading on or sharing material, non-public information (MNPI) is prohibited. Both the tipper (who shares the info) and the tippee (who trades on it) are liable. Penalties include civil fines up to 3× the profit gained or loss avoided and criminal penalties up to $5 million and/or 20 years in prison for individuals.
Market Manipulation
Always Prohibited
Any scheme to artificially inflate or deflate a security's price is prohibited. Common forms: Wash trading (buying and selling the same security to create false activity), matched orders (coordinated buy/sell with another party), painting the tape (creating the appearance of trading activity), capping (keeping a stock price down), and pegging (keeping a stock price up).
Misrepresentations and Omissions
Always Prohibited
An RR cannot make untrue statements of material fact or omit material facts that would make a statement misleading. This applies even if the customer ultimately profits from the recommendation. A knowingly false statement is a violation regardless of outcome. The exam tests this: "The representative performed an unethical action" is correct even if the investment made money.
Commingling Customer Funds
Always Prohibited
An RR cannot mix customer funds or securities with their own personal assets. Customer assets must be segregated from firm and personal assets at all times.
⚠️
Common Exam Trap
The exam will describe an RR who makes a false statement but the customer profits anyway. The violation still occurred. Outcomes don't matter — the conduct itself determines whether a rule was broken. Similarly, an RR who guarantees a customer's account against losses has violated the rules even if no loss ever occurs.
Quick Check
A registered representative recommends a stock to a client. To close the sale, the RR offers to personally buy back the shares if they drop below $90. Is this permitted?
No — this is a guarantee against loss and is always prohibited.
Offering to repurchase shares at a set price is functionally a guarantee. It doesn't matter that the RR is using their own money or that the offer is well-intentioned. Guarantees are prohibited regardless of form.
⚖️

The Gray Zone: Activities That Require Conditions

Section 4 of 8 · Not always yes, not always no — the exam loves these
Sharing in Customer Accounts
FINRA Rule 2150
An RR may share in the profits and losses of a customer's account — but only if ALL three conditions are met:

1. The customer provides written authorization
2. The firm provides written approval
3. Sharing is proportional to the RR's financial contribution

Exception: If the customer is an immediate family member, disproportionate sharing is permitted (the RR can share more than their proportional contribution).
⚠️
Common Exam Trap
An EXCEPT question may list the three real conditions plus "supervisor verbally approves the arrangement." Verbal supervisor approval is the wrong answer — the firm must provide written approval. All three conditions require written documentation.
Borrowing From / Lending To Customers
FINRA Rule 3240
Generally prohibited, but there are five narrow exceptions where it may be permitted with firm approval:

1. The customer is an immediate family member
2. The customer is a registered person at the same firm
3. The customer is a financial institution regularly engaged in lending (e.g., a bank)
4. The parties have a personal relationship outside the broker-customer relationship
5. The loan is based on a business relationship outside the broker-customer relationship

Even when an exception applies, the firm's written procedures must approve the arrangement.
💡 Borrowing/lending default = NO. Sharing in accounts default = ONLY if all 3 conditions met. The exam tests whether you know the conditions, not just the rule.
Outside Business Activities (OBAs)
FINRA Rule 3270
An RR who wants to engage in any business activity outside their firm — rental real estate, playing in a band, consulting, etc. — must provide prior written notice to their firm. The firm may then impose conditions or prohibit the activity. OBAs include any work that may generate income apart from the RR's registered activities. Personal investments are not OBAs.
Private Securities Transactions (PSTs)
FINRA Rule 3280
A PST is any securities transaction outside the RR's regular employment. The RR must give written notice to the firm describing the transaction and their role. If no compensation is involved, the firm simply acknowledges. If compensation is involved, the firm must approve or disapprove in writing, and if approved, must supervise the transaction as if it were the firm's own business.

OBA vs. PST — What's the Difference?

  • OBA = non-securities work outside the firm (rental property, tutoring, etc.)
  • PST = securities transaction outside the firm (selling a friend's startup stock)
  • OBA requires written notice to the firm
  • PST requires written notice + firm approval if compensation is involved
  • Both are about transparency — the firm must know what the RR is doing

Gifts and Business Entertainment

  • Under FINRA Rule 3220, an RR may not give anything of value exceeding $300 per person per year (updated from $100 effective March 30, 2026)
  • The limit does NOT apply to business entertainment where both host and customer are present
  • A dinner where both are present = entertainment (no dollar cap)
  • A gift basket sent to the client's office = gift (subject to the $300 cap)
  • The exam tests the distinction between gifts and entertainment
Quick Check
An RR wants to share in the profits of a customer's account. The customer has given written authorization and the firm has given written approval. The RR contributed 30% of the funds but wants to receive 50% of the profits. Is this allowed?
No — unless the customer is an immediate family member.
FINRA Rule 2150 requires sharing to be proportional to the RR's financial contribution. Contributing 30% but taking 50% of profits violates the proportionality requirement. The only exception is for immediate family members, who may share disproportionately.
📋

Registration Lifecycle: U4, U5 & Statutory Disqualification

Section 5 of 8 · How you say hello, how you say goodbye

📝 Form U4 — "Hello"

  • Uniform Application for Securities Registration
  • Filed by the employing firm (not the individual)
  • Includes 10-year employment history and 5-year residential history
  • Must disclose criminal history, regulatory actions, customer complaints, financial issues
  • Must be updated within 30 days for changes (address, employment, financial disclosures like bankruptcies)
  • Criminal events (charges, convictions, pleas) must be updated within 10 business days

📝 Form U5 — "Goodbye"

  • Uniform Termination Notice
  • Filed by the firm when an RR leaves
  • Must be filed within 30 calendar days of termination
  • Applies regardless of whether departure is voluntary or involuntary
  • Includes reason for termination
  • Becomes part of the public BrokerCheck record
Fingerprinting
Within 30 Days of U4
All registered persons must submit fingerprints to FINRA within 30 days of Form U4 filing. FINRA forwards them to the FBI for criminal background checks. Results are shared with regulators and the firm. Exemptions exist for certain non-registered personnel who don't handle funds, securities, or books and records.
Statutory Disqualification
A person is subject to statutory disqualification for:

• Any felony conviction within the past 10 years
• Securities-related misdemeanors within the past 10 years
• Expulsion or suspension from an SRO
• SEC or court order barring association with a broker-dealer
• Willful violation of securities laws or making false statements to FINRA/SEC

Key distinction: A statutorily disqualified person is NOT automatically banned. The firm may apply to FINRA's Membership Application Program (MAP) for permission to associate with the individual under heightened supervision.
State Registration (Blue Sky Laws)
In addition to federal/FINRA registration, RRs must comply with state registration requirements. Most states require passing the Series 63 (or Series 66) exam in addition to the SIE and a top-off exam. State securities laws are commonly called "blue sky laws" — named after early laws designed to protect investors from speculative schemes with no more substance than "so many feet of blue sky."
💡 U4 = Hello (registration). U5 = Goodbye (termination). Both are filed by the FIRM, not the individual. U5 is due within 30 calendar days.
🎓

Continuing Education: Regulatory Element vs. Firm Element

Section 6 of 8 · Miss the deadline and you're inactive — no exceptions

⚠️ Regulatory Element (FINRA Delivers)

  • Delivered and administered by FINRA
  • Annual — must complete by December 31
  • Content tailored to registration type and disciplinary history
  • Failure to complete → inactive status on January 1
  • While inactive: no trading, no recommendations, no customer contact
  • Can be completed while between firms (not associated)
  • Inactive status is lifted once CE is completed — no need to retake exams

🏢 Firm Element (Firm Delivers)

  • Designed and administered by the firm
  • Annual training — firm sets its own schedule
  • Based on a written needs analysis updated annually
  • Covers compliance, products, ethics, and sales practices
  • Only required while associated with a firm
  • No fixed deadline (unlike Regulatory Element)
Inactive Status vs. Suspension vs. Bar
These three things sound similar but are very different:

Inactive status = administrative result of missing CE deadline. Automatically lifted once CE is completed. Not a disciplinary action.
Suspension = a temporary disciplinary action by FINRA. The RR is prohibited from associating with any FINRA member firm for a set period.
Bar = FINRA's most severe sanction — a permanent prohibition from associating with any FINRA member firm in any capacity.
Maintaining Qualifications Between Jobs
If an RR leaves the industry, they can keep their qualifications current by completing the annual Regulatory Element through FINRA's CE system — even without a firm sponsor. However, they cannot take top-off exams (Series 7, Series 6, etc.) without firm sponsorship. The SIE remains valid for 4 years from the passing date (or from the termination date if previously registered).
RR in Military Service
A registered representative on active military duty is placed on special inactive status. During this time, they are not required to complete CE, may continue receiving trailing commissions from existing client transactions, but may not contact customers or perform registered activities. They do not need to retake exams upon return (unless inactive for more than 2 years after leaving the service).
Quick Check
An RR fails to complete the Regulatory Element by December 31. On January 1, what happens?
The RR is placed on inactive status and cannot perform any registered activities.
Inactive status is automatic on January 1. While inactive, the RR cannot trade, make recommendations, or contact customers. It's not a suspension or bar — it's an administrative status that lifts as soon as the CE is completed. No need to retake exams.
🛡️

Senior & Vulnerable Adult Protections

Section 7 of 8 · Rule 2165 — know the hold periods and the trusted contact
Trusted Contact Person
Firms must make reasonable efforts to obtain the name and contact information of a trusted contact person when opening or updating customer accounts. This person can be contacted if the firm suspects exploitation or diminished capacity. The trusted contact person does NOT have trading authority — they are a resource, not a decision-maker.
Temporary Hold on Disbursements
FINRA Rule 2165
When financial exploitation is suspected, a firm may place a temporary hold on disbursements from accounts of customers age 65 or older or those with mental or physical impairments.

Initial hold: Up to 15 business days
Extension: An additional 10 business days (25 total) with senior firm principal approval

The hold applies to disbursements only — not to trading activity. The firm must notify the trusted contact person and document the basis for the hold.
Red Flags for Senior Exploitation
• Sudden changes in financial patterns
• Unexplained or unusual withdrawals
• A new, unfamiliar person directing transactions
• Fear or confusion when discussing finances
• Dramatic changes to beneficiary designations
⚠️
Common Exam Trap
The hold is on disbursements, not trades. An exam question may offer "25 business days" as the initial hold period — that's wrong. The initial hold is 15 business days. The 25-day figure is the maximum after extension. Also: the trusted contact person has no trading authority — they can't place orders or make investment decisions.
🔢

Key Numbers Every RR Must Know

Section 8 of 8 · The exact figures the SIE tests — memorize these
Gift Limit
$300/person/year
Under FINRA Rule 3220 (as amended effective March 30, 2026), RRs may not give anything of value exceeding $300 per person per year. Previously $100. Does not apply to business entertainment where both host and customer are present. The MSRB has a separate $250 de minimis exception for political contributions under Rule G-37.
Form U5 Filing Deadline
30 Calendar Days
The firm must file Form U5 within 30 calendar days of an RR's departure, regardless of whether the termination is voluntary or involuntary.
U4 Update — Criminal Events
10 Business Days
Criminal events (charges, convictions, pleas) require a U4 update within 10 business days. Financial disclosures (bankruptcies, tax liens, unsatisfied judgments) require updates within 30 calendar days.
Statutory Disqualification — Felony Window
10 Years
Any felony conviction within the past 10 years triggers statutory disqualification. Securities-related felonies have no time limit. Misdemeanors involving money or securities: 10 years.
SIE Exam Validity
4 Years
The SIE is valid for 4 years from the passing date. If you register with a firm and later terminate, it's valid for 4 years from the termination date. Does not require firm sponsorship to take. Anyone 18 or older can sit for it.
Senior Investor Hold Periods
15 + 10 = 25 Days Max
Rule 2165 disbursement hold: initial hold up to 15 business days, extendable by 10 business days with senior principal approval. Maximum total: 25 business days. Applies to customers age 65+ or those with impairments.
Insider Trading Penalties
3× / $5M / 20 Years
Civil penalties: up to 3× the profit gained or loss avoided. Criminal penalties for individuals: up to $5 million fine and/or 20 years imprisonment. Criminal penalties for firms: up to $25 million. Both the tipper and the tippee are liable.
Cold Calling Hours
8 AM – 9 PM
Cold calls may only be made between 8:00 AM and 9:00 PM in the customer's time zone. The caller must identify themselves, the firm, and the purpose of the call at the beginning. Exemptions: existing customers, persons who gave written consent, and responses to inquiries within the last 3 months.
Exam Retake Waiting Periods
30 / 30 / 180
After the 1st failed attempt: wait 30 days. After the 2nd failed attempt: wait 30 days. After the 3rd (and each subsequent) failure: wait 180 days.
Test Yourself

Scenario: Non-Registered Person at a Broker-Dealer

A non-registered administrative assistant at a broker-dealer is asked to accept client orders during a busy period. The assistant has worked at the firm for 5 years and is very familiar with the products. Is this acceptable?

Correct!

Only registered persons may accept customer orders. Experience, tenure, and product familiarity are irrelevant — accepting orders is a registered activity. A non-registered person's role is limited to clerical and ministerial functions.

We have 3,600+ more questions like this in the QuizBuilder.

Not quite

No matter how experienced or knowledgeable the assistant is, taking orders requires registration. Principal review doesn't cure the violation. Disclosure doesn't cure the violation. This is a bright-line rule with no exceptions.

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What Can a Registered Representative Do — SIE Exam Summary

This is the most comprehensive free guide to registered representative rules on the FINRA Securities Industry Essentials (SIE) Exam, updated for 2026. It covers: the distinction between registered and non-registered persons (non-registered persons can only perform clerical functions), what an RR can do (solicit, recommend, take orders, receive commissions, exercise time and price discretion without written authorization), what an RR cannot do (guarantee against loss, unauthorized trading, churning, selling away, front running, insider trading, market manipulation, misrepresentations, commingling funds), conditional permissions (sharing in customer accounts under FINRA Rule 2150 requires written customer authorization plus written firm approval plus proportional sharing; borrowing from or lending to customers has five narrow exceptions under FINRA Rule 3240; outside business activities require written notice under Rule 3270; private securities transactions require written notice and firm approval if compensation is involved under Rule 3280), registration lifecycle (Form U4 for registration filed by the firm, Form U5 for termination filed within 30 calendar days, fingerprinting within 30 days, statutory disqualification for felonies within 10 years), continuing education (Regulatory Element delivered by FINRA annually with December 31 deadline and automatic inactive status on January 1 for non-compliance; Firm Element delivered by the firm annually based on written needs analysis), senior and vulnerable adult protections (FINRA Rule 2165 allows temporary hold on disbursements for customers age 65+ with 15 business day initial hold extendable by 10 business days; trusted contact person has no trading authority), and key numbers (gift limit $300 per person per year effective March 30 2026 under FINRA Rule 3220, insider trading penalties 3x profits plus $5 million and 20 years criminal, cold calling hours 8 AM to 9 PM customer time zone, exam retake waiting periods 30/30/180 days). Published by 2DollarTests.

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