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Form ADV Part 1A Item 5B(2) · Answer type: number · Item 5 - Employees
Item 5B(2) asks approximately how many of the employees reported in Item 5A are registered representatives of a broker-dealer.
This counts employees who hold securities licenses that allow them to buy and sell securities for clients through a brokerage firm. These are the familiar Series 7, Series 66, and related licenses that authorize securities transactions, not just advisory services.
Registered representatives can execute trades, sell securities products, and earn transaction-based compensation like commissions. When the same person serves both as investment adviser and registered representative, they operate under "dual hat" arrangements with different regulatory obligations for each role.
A non-zero count in 5B(2) indicates some employees can both advise clients on investments and execute securities transactions for them. This dual capacity creates potential conflicts between advisory and brokerage interests that firms must manage and disclose.
The count comes from the total employee figure in Item 5A and may overlap with advisory function employees in Item 5B(1) when staff members hold both types of registrations and perform both roles.
5B(2) - Approximately how many of the employees reported in 5.A. are registered representatives of a broker-dealer.
This appears in Item 5B, Employees, which breaks down workforce registrations and functions across different regulatory categories.
Broker-dealer registered representatives signal the firm's ability to offer both advisory and brokerage services through the same personnel. This can provide convenience for clients who want integrated investment advice and transaction execution.
However, dual registration also creates potential conflicts of interest. Representatives may face competing incentives between providing unbiased advisory recommendations and generating transaction-based revenue through brokerage activities.
The count does not reveal how the firm manages these conflicts, whether representatives primarily function as advisers or brokers for specific clients, or how compensation arrangements address potential bias toward transaction generation.
Compare this figure with commission revenue in Item 5E(5) and participation in client transactions in Item 8 to understand how brokerage activities integrate with the advisory business model.
A zero count indicates the firm operates as a pure investment adviser without in-house brokerage capabilities. Clients would execute trades through separate custodians or discount brokers chosen by the adviser or client.
Look for the number in Item 5B(2) on the firm's Best Investors ADV panel. Zero means the firm reports no employees with broker-dealer registrations, indicating a pure advisory model.
A positive number suggests some employees can perform both advisory and brokerage functions. Compare this with advisory function employees in Item 5B(1) to see overlap between advisory and brokerage roles.
Review compensation methods in Item 5E to see whether the firm marks commissions in Item 5E(5), which should align with having broker-dealer registered representatives.
Check Item 8 participation questions for disclosures about how registered representatives handle client transactions and potential conflicts between advisory and brokerage roles.
Consider this information when evaluating potential conflicts of interest and how the firm structures compensation to align with client interests versus transaction revenue.