Guide to Types of Business for Broker-Dealers in Form BD
Oct 15, 2025
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27 min read
Contents
When registering as a broker-dealer, one of the most important disclosures is selecting the type of business you will conduct as a broker-dealer on Form BD. This step determines how regulators view your firm’s activities, which rules apply, and what level of capital and oversight you need to operate.
This guide breaks down the types of business on Form BD, explains what each category means, highlights common pitfalls, and shows how fintech firms can approach this step strategically.
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Understanding Broker-Dealer Types of Business
On Form BD, the SEC and FINRA ask firms to identify their types of business, also referred to as business lines, business types, or business activities. These are predefined categories that describe the specific functions a broker-dealer will carry out, such as underwriting, retail brokerage, or private placements.
Selecting the business type identifies the activities your firm intends to engage in and signals to regulators what rules and capital requirements apply to you.
The key regulators involved are:
SEC (Securities and Exchange Commission): Primary regulator for broker-dealer registration under the Securities Exchange Act of 1934.
FINRA (Financial Industry Regulatory Authority): Oversees member firms’ compliance, supervises day-to-day operations, and approves membership applications.
MSRB (Municipal Securities Rulemaking Board): Governs municipal securities dealers and brokers, if your business includes municipal securities activity.
Department of the Treasury: Regulates government securities brokers and dealers through additional rules under the Government Securities Act.
Checking the wrong box or missing one that matches your activities can create regulatory risk later. For fintech firms, this step can be tricky. Innovative models often do not fit neatly into traditional categories, requiring both legal interpretation and compliance planning.
At InnReg, we help broker-dealers navigate these decisions and build compliance programs that scale with their business →
How Form BD Classifies Broker-Dealer Types of Business
On Form BD, Item 12 lists the official categories for broker-dealer types of business. These categories are designed to cover nearly every activity a broker-dealer might engage in, from exchange trading and underwriting to private placements and proprietary trading.
Each applicant must check at least one category. You can select multiple if your firm will operate across different lines. For fintech firms, it’s common to select more than one because business models often blend traditional brokerage functions with innovative approaches.
Once selected, these categories become part of your regulatory profile. FINRA incorporates them into your membership agreement, which means you cannot expand into other business types later without amending Form BD and, in some cases, submitting a Continuing Membership Application (CMA).
Learn more about Form BD in our article →
The 1% Revenue Threshold Rule
Form BD requires firms to disclose only the business activities that represent more than 1% of their expected revenue. Regulators designed this threshold to focus on material lines of business and prevent firms from over-reporting categories that have little to no impact on their operations.
For example, if a broker-dealer primarily engages in private placements but also anticipates an occasional mutual fund transaction that amounts to less than 1% of revenue, they would not select “mutual fund retailer” as a business type.
When to Use “Other” and How to Explain It
Form BD includes a final option, “Other,” for firms whose business does not fit into the standard categories. Innovative fintech models typically end up in this “Other” classification. Examples include hybrid offerings that combine securities with alternative assets, or platforms that use technology to structure new forms of investment products.
Selecting “Other” is not a red flag, but regulators expect a clear, detailed description in Schedule D. A vague or overly broad explanation can delay approval. Instead, describe the activity in plain language and highlight how it fits within the securities framework.
Discover how InnReg helps clients navigate the broker-dealer registration process →
Detailed Breakdown of Broker-Dealer Types of Business in Form BD
Form BD Item 12 lists more than 20 categories of broker-dealer business activities. Each one corresponds to a specific role that firms can play in the securities markets, such as trading, underwriting, or selling particular types of products. Applicants must check the categories that describe their business, and when selecting “Other,” must provide details on Schedule D.
A. Exchange member engaged in exchange commission business other than floor activities
This category applies when a broker-dealer is a member of a national securities exchange and conducts a commission-based brokerage business, but not through floor trading. In practice, this typically means the firm executes customer orders on an exchange like the NYSE or Nasdaq through electronic systems rather than physical floor presence.
Firms in this category must meet both SEC requirements and the rules of the exchange where they hold membership. Membership brings additional obligations such as exchange-specific reporting, compliance with order handling rules, and capital requirements.
For fintech firms, this category is less common at launch because exchange membership is costly and requires significant infrastructure. Most startups instead access exchanges indirectly through a clearing firm or market-making partner. But if your business model requires direct market access as an exchange member, selecting this category on Form BD is the starting point.
B. Exchange member engaged in floor activities
This category applies to broker-dealers that are members of a national securities exchange and operate directly on the exchange trading floor. Unlike firms that route orders electronically, these firms maintain a physical presence, executing trades on behalf of customers or acting as floor traders.
Being a floor member comes with exchange-specific obligations. These include compliance with floor trading rules, reporting requirements, and often higher capital and staffing needs. Floor activities are less common for new fintech broker-dealers, which typically rely on electronic execution and partnerships with clearing firms.
However, if your business model requires direct floor access, for example, in specialized markets like certain options or futures exchanges, this category on Form BD clarifies your role for regulators. It also signals that your supervisory and compliance program must account for the unique risks of floor-based trading.
C. Broker or dealer making inter-dealer markets in corporate securities over-the-counter
This category applies to firms that act as market makers in corporate securities trading over-the-counter (OTC). A market maker quotes both bid and ask prices and stands ready to trade those securities from its own account with other dealers. In practice, this means the firm helps provide liquidity in less centralized markets, such as the Nasdaq or OTC markets.
Market-making activity comes with specific capital requirements and heightened regulatory oversight. Under SEC Rule 15c3-1, firms engaged in market making typically must maintain higher minimum net capital than retail-focused broker-dealers. FINRA also expects robust supervisory systems to monitor quoting practices and trading activity.
For fintech firms, market making is resource-intensive and generally pursued by companies with advanced trading technology or algorithmic strategies. If your business model requires actively supporting liquidity in OTC securities, the market-making category identifies that role to regulators and signals the need for robust risk and compliance controls.
D. Broker or dealer retailing corporate equity securities over-the-counter
This category covers firms that buy and sell corporate equity securities (stocks) for customers outside of an exchange environment. In practice, this means executing customer trades in OTC equities, often by routing them through market makers or clearing partners.
Retail OTC business is one of the most common categories for startup broker-dealers, particularly fintech platforms offering stock trading. While these firms do not make markets themselves, they still face strict compliance obligations around order routing, best execution, and customer disclosures.
For fintech founders, this is often the first category selected on Form BD. Interacting directly with retail customers brings added regulatory scrutiny around supervision, sales practices, and adherence to Reg BI requirements. Proper policies and supervisory structures are essential before engaging in this type of business.
Learn more about Reg BI in our article →
See also:
E. Broker or dealer selling corporate debt securities
This category applies to broker-dealers that sell or trade corporate bonds and other corporate debt instruments. Unlike equities, debt securities often trade less frequently and may require more careful pricing and disclosure to investors.
For firms engaged in this business, compliance obligations include meeting SEC and FINRA rules for fair pricing, suitability, and disclosure. Debt transactions are subject to oversight under rules such as FINRA Rule 2121 (fair prices and commissions) and FINRA Rule 2232 (customer confirmations). Firms also need systems to track markups and markdowns, particularly in less liquid markets.
For fintech broker-dealers, this category is less common but growing as platforms experiment with fractionalized bonds and alternative access to fixed income markets. If corporate debt is part of your business model, Form BD requires you to check this category and build supervisory procedures tailored to pricing transparency and investor protections.
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F. Underwriter or selling group participant (corporate securities other than mutual funds)
This category applies to broker-dealers acting as underwriters or selling group members for corporate securities offerings, excluding mutual funds. Underwriters play a central role in bringing securities to market by purchasing them from the issuer and reselling them to investors. Selling group participants distribute securities without taking on the full underwriting risk, but still have a role in the offering.
Regulatory obligations here are substantial. Firms must comply with Securities Act requirements, SEC disclosure rules, and FINRA’s corporate financing standards, including Rule 5110 on underwriting compensation. During reviews and exams, regulators closely examine conflicts of interest, allocation practices, and investor suitability are closely examined s.
For fintech broker-dealers, this category is relevant if the business model includes investment banking functions, such as supporting issuers with capital raising or IPOs. Checking this box on Form BD signals to regulators that your firm will engage in these activities and requires policies covering due diligence, offering documentation, and supervisory oversight.
G. Mutual fund underwriter or sponsor
This category applies to broker-dealers that serve as the principal underwriter or sponsor of a mutual fund. In this role, the firm contracts directly with the fund to distribute its shares to other broker-dealers or to the public.
Regulatory requirements for mutual fund underwriters include compliance with SEC rules under the Investment Company Act, as well as FINRA limits on sales charges and distribution arrangements (communications rule (2210)). Oversight also extends to advertising, marketing materials, and compensation structures, all of which regulators review closely.
For fintech firms, this category may be relevant if the business model involves launching proprietary funds, ETFs, or other pooled investment vehicles. Selecting this option on Form BD indicates that the firm will be directly involved in fund distribution, which requires specialized supervisory procedures and coordination with fund management.
H. Mutual fund retailer
This category applies to broker-dealers that sell mutual fund shares directly to customers. Unlike underwriters or sponsors, mutual fund retailers distribute third-party funds to investors, often alongside other investment products.
Regulatory obligations for mutual fund retailers include compliance with FINRA rules on suitability, disclosure of share class differences, and proper application of breakpoint discounts. Since mutual funds are widely sold to retail clients, regulators also expect clear supervisory procedures to monitor sales practices and protect against conflicts of interest.
For fintech broker-dealers, this category is relevant if the platform allows users to purchase mutual funds in addition to equities or ETFs. Selecting this business type on Form BD demonstrates direct customer-facing distribution, which brings additional supervisory and disclosure responsibilities.
I.1. U.S. government securities dealer
This category applies to firms that buy and sell US government securities, such as Treasury bills, notes, bonds, and certain federal agency securities, for their own account. Acting as a dealer means the firm trades as principal and takes positions in government securities to support client needs or market activity.
Regulation is not limited to the SEC and FINRA. Government securities dealers must also comply with additional rules under the Government Securities Act, which the US Department of the Treasury administers. Requirements include specialized recordkeeping, financial reporting, and, in some cases, registration with the Treasury itself.
For fintech broker-dealers, entering this space is complex because of capital intensity and the need for specialized compliance infrastructure. Selecting this category on Form BD signals to regulators that your firm will be active in the government bond market as a principal, which brings higher operational and supervisory expectations.
I.2. U.S. government securities broker
This subcategory applies to broker-dealers that handle US government securities transactions as agents rather than principals. In this role, the firm facilitates trades between customers and counterparties but does not take positions for its own account.
Compliance obligations are similar in scope to those of government securities dealers, but the capital requirements are typically lower since no proprietary positions are carried. Even so, recordkeeping and disclosure (SEC 17a-4) rules under the Government Securities Act still apply.
For fintech firms, this category may be more accessible than dealer status if the business model involves giving customers access to Treasuries without the firm itself holding inventory. Checking this box indicates that the firm’s role will be limited to brokering government securities trades rather than trading them directly.
J. Municipal securities dealer
This category applies to broker-dealers that buy and sell municipal securities, such as state or local government bonds, for their own account. Acting as a dealer means the firm trades as principal, holding municipal securities in inventory and reselling them to customers or other firms.
Regulatory oversight here extends beyond the SEC and FINRA. Municipal dealers must also register with the Municipal Securities Rulemaking Board (MSRB) and comply with MSRB rules. These cover areas such as fair pricing, disclosures, advertising, and political contribution restrictions under Rule G-37. Firms must also designate principals with the Series 53 qualification to supervise municipal business.
For fintech broker-dealers, participation in the municipal securities market is less common but possible, especially for platforms experimenting with fractionalized or digital access to municipal bonds. Selecting this category on Form BD requires additional supervisory expertise and a clear compliance plan to handle the unique obligations tied to municipal products.
K. Municipal securities broker
This category applies to broker-dealers that facilitate municipal securities transactions for customers but do not take positions for their own account. In this role, the firm acts as an agent, connecting buyers and sellers of state or local government bonds.
Municipal brokers, like dealers, fall under the jurisdiction of the SEC, FINRA, and the MSRB. They must comply with MSRB rules on disclosures, suitability, and fair dealing, as well as maintain principals qualified with the Series 53 license to oversee this line of business.
For fintech broker-dealers, acting as a municipal broker may align with platforms designed to give investors access to municipal bonds without the firm carrying inventory. Choosing this category on Form BD indicates an agency role, which typically carries lower capital requirements than dealing but still demands a robust compliance program to address disclosure and sales practice risks.
L. Broker or dealer selling variable life insurance or annuities
This category applies to broker-dealers that distribute variable insurance products, such as variable life insurance policies or variable annuities. These products combine insurance features with investments in underlying sub-accounts, making them both securities and insurance contracts.
Because of their hybrid nature, firms in this category face regulation on two fronts. Reps must be licensed as insurance producers in the states where they sell, while the broker-dealer must also comply with FINRA rules for securities sales. Supervisory responsibilities include product-specific training, disclosure of fees and surrender charges, and suitability reviews under FINRA Rule 2330 for variable annuities.
For fintech broker-dealers, this category is relevant if the business model includes offering insurance-linked investment products through digital platforms. Selecting it on Form BD signals that your firm will need both securities compliance infrastructure and insurance licensing coordination, an area where preparation is critical to avoid regulatory gaps.
See also:
M. Solicitor of time deposits in a financial institution
This category applies to broker-dealers that solicit or sell bank certificates of deposit (CDs) or other time deposits on behalf of financial institutions. These are often called “brokered CDs,” where customers can purchase CDs issued by multiple banks through a brokerage platform.
Although CDs are banking products rather than securities, FINRA regulates how member firms market them. Firms must clearly disclose that these are bank obligations, identify whether the CDs are FDIC insured, and avoid any suggestion that they are covered by SIPC. Marketing and sales practices in this area are subject to close scrutiny to prevent customer confusion.
For fintech broker-dealers, this category may be relevant if the platform integrates deposit products alongside securities offerings. Selecting it on Form BD signals to regulators that the firm will participate in cross-industry activity, which requires tailored disclosures and supervisory procedures to keep bank products and securities activities properly distinguished.
N. Real estate syndicator
This category applies to broker-dealers that distribute securities in real estate syndications, such as limited partnership or LLC interests tied to real estate projects. These are typically structured as direct participation programs (DPPs), which allow investors to take part in specific property developments or income-producing real estate ventures.
Regulatory expectations are high in this area because real estate syndications are often illiquid, complex, and marketed to retail investors. Broker-dealers must perform thorough due diligence on the issuer and offering documents, confirm suitability for each investor, and comply with FINRA’s compensation and disclosure rules for DPPs.
For fintech broker-dealers, this category may apply if the platform facilitates investments in fractionalized real estate or private placement real estate funds. Checking this box on Form BD signals to regulators that your firm intends to operate in a space where supervisory rigor and clear investor disclosures are critical.
O. Broker or dealer selling oil and gas interests
This category applies to broker-dealers that distribute securities tied to oil and gas programs. These offerings are often structured as limited partnerships or joint ventures that fund drilling, exploration, or production projects. Like real estate syndications, they fall under the umbrella of direct participation programs (DPPs).
Oil and gas investments carry distinct risks, including commodity price volatility, operational challenges, and illiquidity. For that reason, regulators expect broker-dealers to conduct thorough due diligence on the issuer, confirm suitability for each investor, and comply with FINRA’s limits on compensation and disclosure standards for DPPs. Supervisory systems must be designed to address the complexity and risks of these programs.
For fintech broker-dealers, this category may apply if a platform facilitates investor access to private placement energy ventures or fractionalized oil and gas royalties.
P. Put and call broker, dealer, or option writer
This category applies to broker-dealers that engage in the options market. It covers firms that act as brokers for customer option trades as well as those that write (sell) option contracts on their own account.
The options business requires compliance with a specialized set of rules. FINRA Rule 2360 governs options activity, including customer account approvals, risk disclosures, and supervisory reviews. Firms must also designate a Registered Options Principal (Series 4) to oversee this activity, and implement written supervisory procedures tailored to options trading.
For fintech broker-dealers, selecting this category is significant. Options are high-risk, leverage-based products, and regulators expect strong risk controls, detailed customer disclosures, and rigorous supervision. If your platform intends to offer listed options to retail clients, you’ll need the infrastructure and qualified personnel to manage this complex product line.
Q. Broker or dealer selling securities of only one issuer or associate issuers (other than mutual funds)
This category applies to broker-dealers that distribute securities issued by a single company, or that company’s affiliates, rather than a range of issuers. In many cases, these firms exist to sell the securities of their parent or a closely related business.
Regulators view this category carefully because of the concentration risk and potential conflicts of interest. Firms in this space must provide clear disclosures to investors about the lack of diversification and must establish supervisory systems that address suitability and sales practices. Restrictions on compensation and marketing also apply, especially where the broker-dealer is affiliated with the issuer.
For fintech broker-dealers, this category may come into play if the business model is tied to raising capital for a single company or project. Selecting this option on Form BD limits your operations to that issuer, so expansion into other offerings later would require amending Form BD and, in most cases, a Continuing Membership Application (CMA).
R. Broker or dealer selling securities of non-profit organizations (e.g., churches, hospitals)
This category applies to broker-dealers that distribute securities issued by non-profit organizations. Examples include church bonds, hospital revenue bonds, or similar instruments used by non-profits to finance operations or capital projects.
Although these securities are tied to charitable or community institutions, they carry investment risks similar to other debt offerings. Broker-dealers selling them must comply with SEC and FINRA rules on suitability (Rule 2111), disclosures, and fair dealing. Where these securities qualify as municipal bonds, MSRB rules may also apply.
For fintech broker-dealers, this category is less common but could apply if a platform is designed to connect investors with community-based or faith-based funding opportunities. Selecting this option on Form BD signals an intent to participate in a niche area of the securities market, where transparency and clear investor communication are critical.
S. Investment advisory services
This category applies to broker-dealers that also provide investment advisory services for compensation. While broker-dealers may give incidental advice as part of brokerage activities, offering dedicated advisory services, such as portfolio management, financial planning, or robo-advisory, usually requires separate registration as an investment adviser under the Investment Advisers Act of 1940 or state law.
Firms that select this category on Form BD must be prepared to manage the overlap between brokerage and advisory regulations. Advisory accounts are subject to a fiduciary duty, while brokerage accounts fall under Regulation Best Interest (Reg BI). Compliance programs must address these distinctions, especially around disclosures, conflicts of interest, and how client accounts are classified.
For fintech broker-dealers, this category is increasingly relevant. Many platforms blend brokerage and advisory features, such as offering both self-directed trading and automated portfolio management. Selecting this option on Form BD signals to regulators that advisory services are part of your business, and it requires careful coordination with Form ADV filings and advisory compliance infrastructure.
See also:
T.1. Broker or dealer selling tax shelters or limited partnerships in primary distributions
This subcategory applies to broker-dealers that sell tax shelter investments or limited partnership interests in their initial offerings. These are typically structured as direct participation programs (DPPs), such as real estate, oil and gas, or equipment leasing partnerships.
Primary distributions carry heightened regulatory expectations. FINRA requires broker-dealers to conduct detailed due diligence on the issuer, clearly disclose risks and fees, and confirm investor suitability. Because these products are illiquid and often marketed based on tax advantages, firms must supervise sales closely to prevent misleading claims or inappropriate recommendations.
T.2. Broker or dealer selling tax shelters or limited partnerships in the secondary market
This subcategory applies when a broker-dealer facilitates resale transactions of limited partnership or tax shelter interests after the initial distribution. Secondary market activity is more limited due to the illiquidity of these products, but when it occurs, firms must still comply with FINRA’s rules on suitability, fair pricing, and disclosure.
For fintech broker-dealers, these categories may be relevant if the platform facilitates investor access to alternative or non-traditional investment programs. Selecting either subcategory on Form BD indicates to regulators that your firm is entering a highly scrutinized area, requiring a compliance program built around careful due diligence and investor protection.
U. Non-exchange member arranging for transactions in listed securities by an exchange member
This category applies to broker-dealers that are not direct members of a national securities exchange, but that arrange for customer transactions in exchange-listed securities through firms that are members. In other words, the broker-dealer facilitates access to listed securities without holding exchange membership itself.
Most retail-focused and fintech broker-dealers fall into this category, as direct exchange membership can be costly and operationally complex. Instead, these firms route customer orders through clearing brokers or correspondents that are exchange members.
Selecting this category on Form BD makes clear to regulators that your firm will be engaged in listed securities trading indirectly. The compliance obligations focus on order routing, best execution, and transparency. Firms must also maintain supervisory systems to oversee their clearing or introducing broker arrangements (Rule 4311), so that customer trades are handled properly, even though execution occurs through a third party.
V. Trading securities for own account
This category applies to broker-dealers that trade securities for their own proprietary accounts rather than exclusively on behalf of customers. Proprietary trading can include market-making, arbitrage strategies, or other activities where the firm seeks profit from its own positions.
Regulatory requirements here are among the most demanding. Firms engaged in proprietary trading are subject to higher net capital requirements under SEC Rule 15c3-1 and must implement robust risk management frameworks to monitor exposures. Proprietary trading firms may also fall under additional rules depending on the products they trade, such as equities, options, or fixed income.
For fintech broker-dealers, proprietary trading is usually not the first step, but it can become part of a business model that incorporates algorithmic or quantitative strategies. Selecting this category on Form BD signals to regulators that your firm is committing capital to its own trading activities, which requires strong systems, supervisory expertise, and compliance infrastructure.
W. Private placements of securities
This category applies to broker-dealers that sell securities through private placements, typically conducted under Regulation D or other exemptions from SEC registration. Startups, funds, or alternative investment vehicles often use private placements to raise capital from accredited investors.
Regulatory obligations include conducting thorough due diligence on the issuer, verifying investor accreditation, and ensuring offering documents are accurate and not misleading. FINRA Rule 5122 (Private Placements of Securities Issued by Members) and Rule 5123 (Private Placements of Securities) impose specific filing and disclosure requirements for member firms engaged in these offerings.
For fintech broker-dealers, this category is one of the most common. Many digital platforms focus on connecting investors with private companies or alternative assets. Selecting this category on Form BD signals an intent to operate in a flexible but heavily scrutinized space, where strong compliance controls and clear disclosures are necessary to manage regulatory expectations and investor risks.
X. Broker or dealer selling interests in mortgages or other receivables
This category applies to broker-dealers that distribute securities backed by pools of mortgages or other receivables, such as auto loans, credit card debt, or consumer finance contracts. These products are generally structured as asset-backed securities (ABS) and may also include certain types of mortgage-backed securities (MBS).
Regulatory oversight here is significant because these securities can be complex, with risks tied to credit quality, repayment structures, and market conditions. Broker-dealers engaged in this business must comply with SEC disclosure requirements for structured products, FINRA suitability standards, and supervisory expectations around marketing and investor communications.
For fintech broker-dealers, this category could apply if a platform facilitates access to fractionalized loan portfolios, mortgage interests, or other receivables packaged as securities. Selecting it on Form BD indicates an intent to operate in a highly technical area, where investor understanding and regulatory scrutiny are both elevated.
Y. Broker or dealer involved in a networking, kiosk, or similar arrangement with a:
Y.1 With a Bank, Savings Bank or Association, or Credit Union
This subcategory applies to broker-dealers that operate inside or alongside banks or credit unions through a networking agreement, branch arrangement, or in-branch kiosk. These agreements allow financial institutions to offer securities products to their customers through an affiliated or third-party broker-dealer.
Regulators focus heavily on customer clarity in these setups. Firms must disclose that securities are not FDIC insured, not bank guaranteed, and may lose value. FINRA Rule 3160 governs these arrangements, requiring clear signage, disclosure statements, and supervision of broker activity within the bank environment.
For fintech broker-dealers, this subcategory may apply if your platform partners with a bank or credit union to distribute securities under a co-branded arrangement. Selecting it on Form BD signals to regulators that your business model involves integrating brokerage with depository institutions, which requires careful attention to disclosures and supervisory structures.
Learn more about bank-fintech partnerships →
Y.2 With an Insurance Company or Agency
This subcategory applies when a broker-dealer operates through an insurance company or its agents, typically to distribute variable products, mutual funds, or other securities alongside insurance offerings.
Like bank arrangements, these setups must clearly separate insurance from securities activity. Disclosures, advertising controls, and proper supervision are critical, especially where reps hold dual insurance and securities licenses. FINRA and state insurance regulators both oversee these relationships.
For fintech broker-dealers, this may come into play if the platform distributes investment products in partnership with insurance carriers. Selecting this category signals an intention to operate across both securities and insurance channels, requiring strong compliance coordination.
Z. Other
This category is designed for broker-dealer activities that do not fall into any of the standard Form BD categories. Firms selecting “Other” must provide a detailed explanation in Schedule D describing the specific business activities.
Regulators do not view “Other” as a catch-all. Instead, they expect firms to explain clearly how the activity operates and what securities are involved. A vague description is likely to trigger follow-up questions or delays in the approval process.
For fintech broker-dealers, this category often comes into play. Innovative models, such as hybrid securities linked to digital assets, new forms of tokenized securities, or creative distribution methods, may not fit traditional definitions. When used carefully, the “Other” designation allows firms to describe these models in plain terms.
Key Regulatory and Compliance Considerations
Each business type carries specific net capital requirements, supervisory obligations, and disclosure standards. Misalignment between your declared activities and your actual operations can expose your firm to regulatory scrutiny, exam findings, or restrictions on business growth.
Net Capital Requirements by Business Type
Net capital rules under SEC Rule 15c3-1 establish the minimum financial cushion broker-dealers must maintain. The requirement depends on the type of business a firm conducts.
Below is a simplified comparison of common net capital requirements tied to Form BD business types:
Business Type | Minimum Net Capital Requirement | Notes |
|---|---|---|
Introducing broker (no custody of funds/securities) | $5,000 | Applies if the firm introduces accounts to a clearing broker. |
Mutual fund retailer (selling only redeemable shares of investment companies) | $5,000 | Lower threshold due to limited risk profile. |
Broker-dealer not holding customer funds but receiving and forwarding orders | $50,000 | Applies to firms routing trades without custody. |
Proprietary trading firm (trading for own account) | $100,000 | Reflects a higher risk from principal trading. |
Carrying broker-dealer (holding customer funds/securities) | $250,000 | Covers firms with custody responsibility. |
Market maker in securities (including OTC market making) | $100,000 (may be higher based on activity) | Rule includes position-based add-ons. |
Government securities dealer | $100,000 (higher for larger positions) | Additional Treasury rules apply. |
Municipal securities dealer | $100,000 | Must also comply with MSRB financial rules. |
A broker-dealer that endorses or writes Options other than on a registered national securities exchange | $100,000 | Subject to options-specific requirements under FINRA Rule 2360. |
The thresholds above are minimums. Many firms need higher capital in practice due to their trading volume, underwriting activity, or commitments in customer accounts.
For fintech broker-dealers, capital planning is a key step in aligning your Form BD selections with business strategy. Choosing categories that require higher net capital can affect your runway and funding needs. A practical assessment upfront can help avoid costly changes later.
Required Supervisory Roles and Principal Registrations for Each Business Type
Every business type selected on Form BD comes with supervisory obligations. FINRA requires broker-dealers to designate registered principals with the appropriate qualifications for each line of business. The mix of supervisory roles will depend on the activities disclosed on Form BD.
Below is a summary of key principal registrations typically required:
Business Activity | Principal Registration(s) | Notes |
|---|---|---|
General securities brokerage (retail, institutional) | Series 24 (General Securities Principal) | Oversees most day-to-day brokerage activities. |
Municipal securities (dealer or broker) | Series 53 (Municipal Securities Principal) | Required for supervision of municipal securities business. |
Options (puts, calls, option writing) | Series 4 (Registered Options Principal) | Oversees options trading, approvals, and risk management. |
Investment banking/underwriting | Series 79 (Investment Banking Principal) | Required for firms engaged in underwriting or M&A advisory. |
Government securities | Series 24 (General Securities Principal) | Treasury rules add extra compliance requirements. |
Proprietary trading | Series 24, plus designated FinOp for capital reporting | Must ensure trading activity complies with net capital and reporting rules. |
Mutual funds (retail or sponsor) | Series 26 (Investment Company/Variable Contracts Principal) | Specific to mutual funds and variable product distribution. |
Financial and operational oversight | Series 27 or 28 (Financial and Operations Principal – FinOp) | Required for net capital, books and records, and financial filings. |
You can learn about all 32 FINRA Licence Exams in our guide.
Supervisory staffing is often one of the most underestimated requirements for new broker-dealers. Even fintech firms with highly automated platforms must have qualified principals in place before approval. The mix of licenses depends on the categories checked on Form BD, and regulators will confirm that the membership application adequately covers all roles.
Learn how InnReg helps broker-dealers meet regulatory requirements by providing outsourced chief compliance officer services →
Membership Agreement Restrictions and How They Affect Expansion
When FINRA approves a broker-dealer, the approval comes with a Membership Agreement that reflects the business types selected on Form BD. This agreement functions as a binding document: it outlines exactly which activities a firm is authorized to conduct.
The Membership Agreement is restrictive by design. A firm approved to act as a retail broker, for example, cannot later begin underwriting securities or trading for its own account without first filing a Continuing Membership Application (CMA). Expanding into new categories requires regulatory review to confirm the firm has sufficient capital, supervisory staff, and systems to support the additional activity.
For fintech broker-dealers, these restrictions are an important strategic consideration. Innovative platforms often start with one or two categories, such as private placements or retail OTC equity trading. However, growth plans, such as adding options, investment advisory services, or proprietary trading, will trigger amendments to the Membership Agreement. Building a compliance roadmap early can help reduce delays and surprises when expansion becomes a priority.
Ongoing Reporting Obligations and When to Amend Form BD
Filing Form BD is not a one-time event. Broker-dealers are required to keep the information on file accurate and current. That means updating the form whenever a material change occurs in the business.
Examples of situations requiring an amendment include:
Adding or discontinuing a business type
Changes in ownership or control of the firm
Adding or removing control affiliates
Disciplinary events or regulatory actions involving the firm or its principals
Relocation of the main office
Amendments must generally be filed promptly, within 30 days of the change. Failure to update Form BD can result in regulatory findings, penalties, or challenges during examinations.
Practical Steps for Founders and Compliance Teams
Selecting the right types of business on Form BD sets the foundation for your firm’s operations, supervision, and growth strategy. Founders and compliance teams require a practical framework to approach these decisions, striking a balance between ambition and regulatory expectations.
How to Decide Which Business Types to Select When Applying
The business types you choose on Form BD define the scope of your broker-dealer’s operations. Each choice carries supervisory and financial implications, so it’s important to approach the decision strategically. The goal is to select categories that match your planned activities without creating unnecessary obligations.
Aligning the Business Model with Capital and Supervisory Requirements
The business types selected determine the capital you must maintain and the supervisory staff you must designate:
Capital: Each business type carries minimum net capital obligations under SEC Rule 15c3-1. A firm that wants to engage in proprietary trading or market making, for example, must hold significantly more capital than a mutual fund retailer or introducing broker. Misjudging these requirements can impact launch timelines or force unexpected fundraising.
Supervision: FINRA expects every line of business to have qualified principals in place before approval. Categories such as options trading, municipal securities, and investment banking each require specialized supervisory licenses. Firms must align their business plans with available personnel or consider outsourcing principal roles where appropriate.
Innovative models may span multiple categories, increasing both capital requirements and staffing needs. A realistic assessment of your financial resources and supervisory capacity should guide the selection of categories during registration, ensuring your compliance program aligns with your operational capabilities.
When to Amend Form BD and When to File a CMA with FINRA
Amending Form BD and filing a Continuing Membership Application (CMA) can be related but distinct obligations. Understanding the difference is critical for managing your firm’s regulatory filings efficiently.
Form BD Amendments
These are required whenever material information changes. Examples include changes to ownership, control persons, business activities, or disciplinary disclosures. Amendments must typically be filed within 30 days of the change. They keep your registration record current, but do not authorize you to expand beyond your Membership Agreement.
CMA Filings
A Continuing Membership Application is required when a firm wants to make material changes to its operations that fall outside of its approved Membership Agreement.
Examples include:
Adding a new business line, such as moving from retail brokerage into underwriting
Mergers or acquisitions that change the ownership structure
Material changes in capital structure
Adding or relocating branch offices with new activities
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Selecting the right business types on Form BD is a pivotal decision for any broker-dealer. It defines the scope of your operations, shapes your supervisory and capital requirements, and sets the boundaries of your Membership Agreement. For fintech firms, the challenge is even greater, as innovative models often overlap multiple categories or stretch beyond traditional definitions.
Approaching this step strategically helps balance regulatory obligations with business goals. Careful planning at the application stage reduces the risk of costly amendments later and provides a stronger foundation for growth. Whether your focus is retail brokerage, private placements, or more complex activities, aligning your Form BD selections with your actual business model is essential.
How Can InnReg Help?
InnReg is a global regulatory compliance and operations consulting team serving financial services companies since 2013.
We are especially effective at launching and scaling fintechs with innovative compliance strategies and delivering cost-effective managed services, assisted by proprietary regtech solutions.
If you need help with broker-dealer compliance, reach out to our regulatory experts today:
Published on Oct 15, 2025
Last updated on Oct 15, 2025
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