Illinois Securities License Requirements: A Complete Guide

Quick Answer: Illinois Securities Licensing Overview

Illinois securities licensing is governed by the Illinois Securities Law of 1953. The Illinois Secretary of State, Securities Department is the primary regulator. It registers broker-dealers, agents, investment advisers, and investment adviser representatives (IARs) doing business in the state. The department enforces compliance through examination, investigation, and disciplinary action.

Four categories of persons and firms must register before transacting securities business in Illinois:

• Broker-Dealers: Firms that buy and sell securities for their own accounts or for customers.
• Agents: Individuals who represent broker-dealers or issuers in effecting securities transactions.
• Investment Advisers (IAs): Firms or individuals compensated for advising others about securities.
• Investment Adviser Representatives (IARs): Individuals who provide investment advisory services on behalf of a registered investment adviser.

The general process for each category involves submitting an application through FINRA's Central Registration Depository (CRD) or the Investment Adviser Registration Depository (IARD), passing required examinations, meeting financial requirements, and maintaining ongoing compliance with Illinois administrative regulations.

Defining Regulated Entities: Who Needs a License in Illinois?

Illinois law defines each regulated category, with additional detail in Illinois administrative regulations.

Broker-Dealers

A broker-dealer is any person engaged in the business of effecting transactions in securities for the account of others or for their own account under Illinois law. This covers full-service brokerage firms, discount brokers, and any entity that regularly buys or sells securities as part of its business, whether acting as agent or principal.

Agents

An agent is any individual, other than a broker-dealer, who represents a broker-dealer or issuer in effecting or attempting to effect purchases or sales of securities under Illinois law. A registered representative at a brokerage firm is the clearest example. Partners, officers, and directors of a broker-dealer are included when they perform agent functions.

Investment Advisers

An investment adviser is any person who, for compensation, engages in the business of advising others about the value of securities or the advisability of investing in, purchasing, or selling securities, as defined by Illinois law. This includes portfolio managers, financial planners who charge fees for securities advice, and firms providing model portfolios.

The federal/state registration split is based on assets under management (AUM). Advisers with AUM of $110 million or more generally register with the SEC as federal covered investment advisers and file a notice with Illinois rather than registering directly. Advisers below the $100 million threshold (with a $100–$110 million buffer zone for switching) register with the Illinois Secretary of State, Securities Department. Consult Illinois law and administrative regulations for current thresholds.

Investment Adviser Representatives (IARs)

An IAR is any individual who, on behalf of an investment adviser, makes recommendations or renders investment advice regarding securities, manages accounts, determines which advice to give, solicits clients, or supervises employees who do any of the above, as defined by Illinois law. An IAR employed by a state-registered IA must register in Illinois. IARs of federal covered advisers who have a place of business in Illinois must also register with the state.

Broker-Dealer and Agent Registration in Illinois

Application and FINRA Filing

Broker-dealers register in Illinois by filing Form BD through FINRA's CRD system, as required by Illinois law. Agents register using Form U4, also through CRD. Illinois is a CRD-participating state, so filings made at the federal level flow through to the state upon payment of the applicable Illinois fee.

Required Examinations for Agents

Standard requirements under Illinois administrative regulations include:

The Series 63 (Uniform Securities Agent State Law Examination) or Series 66 (combined with Series 7) satisfies the state law examination requirement. Consult the Illinois Secretary of State, Securities Department for any current exam waivers or substitutions.

Financial Requirements for Broker-Dealers

Broker-dealers must meet minimum net capital requirements and may be required to maintain a surety bond. The specific minimum net capital figures and surety bond amounts are set by Illinois administrative regulations and vary based on the type of business conducted. Consult the Illinois Secretary of State, Securities Department directly for current thresholds before filing.

Fingerprinting and Background Checks

All broker-dealer applicants and agents must submit fingerprints for a criminal background check as part of the CRD registration process, as required by Illinois law. FINRA processes fingerprint submissions on behalf of Illinois.

Disclosure of Disciplinary Actions

Applicants must disclose all disciplinary history, including criminal charges, regulatory actions, civil judgments, and customer complaints, on Form BD or Form U4. Illinois reviews this history and may deny, condition, or revoke registration based on findings under Illinois law.

Investment Adviser and IAR Registration in Illinois

Form ADV for Investment Advisers

State-registered investment advisers file Form ADV Parts 1 and 2 through the IARD system, as required by Illinois law. Part 1 covers ownership, business activities, and disciplinary history. Part 2 (the "brochure") must be written in plain English and delivered to clients. Illinois requires both parts to be current and accurate at all times.

Form U4 for IARs

IARs file Form U4 through the CRD system. Consult Illinois law and administrative regulations. IARs of state-registered advisers and IARs of federal covered advisers with a place of business in Illinois must both register.

Required Examinations for IAs and IARs

Professional Designation Waivers

Illinois recognizes certain professional designations as substitutes for the Series 65 examination requirement. Holders of the following designations in good standing are generally eligible for a waiver. Consult Illinois administrative regulations for the current list:

• Certified Financial Planner (CFP)
• Chartered Financial Analyst (CFA)
• Chartered Investment Counselor (CIC)
• Chartered Financial Consultant (ChFC)
• Personal Financial Specialist (PFS)

Verify the current waiver list with the Illinois Secretary of State, Securities Department before relying on a designation, as the approved list can change.

Financial Requirements for Investment Advisers

State-registered investment advisers must meet minimum net worth requirements and, in some cases, maintain a surety bond. This is particularly true if they take custody of client funds or charge prepaid fees exceeding a threshold amount. Consult Illinois law and administrative regulations. Specific dollar thresholds vary by circumstances. Consult the Illinois Secretary of State, Securities Department for current figures.

Notice Filing for Federal Covered Advisers

Federal covered investment advisers (SEC-registered) doing business in Illinois do not register with the state but must file a notice through IARD and pay the applicable Illinois notice filing fee, as required by state law. The notice filing must be renewed annually.

Common Exemptions from Illinois Securities Licensing

Key exemptions are found in Illinois law and administrative regulations.

De Minimis Exemption for Investment Advisers

An investment adviser with no place of business in Illinois is exempt from state registration if it has had fewer than six clients who are Illinois residents during the preceding 12-month period. Consult Illinois law for precise conditions. Full registration is required once that threshold is reached or exceeded.

De Minimis Exemption for IAR