How Brokers Can Navigate SEC Rule 506(c)

by Bilzin Sumberg


How does the Securities and Exchange Commission’s (SEC) Rule 506(c) impact commercial real estate brokers? What can real estate brokers do to meet securities broker-dealer requirements? And is it possible to obtain dual licenses as real estate and securities brokers? caught up with corporate attorneys David T. Schubauer, a partner with Miami-based Bilzin Sumberg Baena Price & Axelrod, and associate Amy Podolsky, also with the firm’s corporate group, discuss the answers to these questions. If you missed part one of this exclusive interview this morning, you can still read it: Will This SEC Rule Boost CRE Crowdfunding? How does the new SEC rule impact real estate brokers?

Podolosky: Real estate brokers and others involved in offering and selling condo hotel units that are marketed with a rental arrangement and, thus, economic benefits, are deemed to be acting as a securities broker. For that reason, they are required to be registered as such with the SEC and relevant State securities regulators. They also need to be a registered member of the Financial Industry Regulatory Authority (FINRA). What can real estate brokers do to meet securities broker-dealer requirements?

Schubauer: If a real estate brokerage firm is involved in offering and selling condo hotel units that are marketed with a rental arrangement, the firm would need to be registered as a securities brokerage firm. Individual real estate sales associates can become dually licensed with a securities brokerage firm and a real estate brokerage firm, in which case all of their commissions for selling condo hotel units must be paid through the securities brokerage firm.

However, in the case of dually licensed sales persons, there must be a clear separation between securities and non-securities real estate activities—such as the real estate brokerage firm that itself is not also licensed as a securities brokerage firm must not be involved in selling condo hotels—and the real estate brokerage firm that itself is not dually licensed must not directly or indirectly receive any of the commissions or other compensation related to sales of condo hotel units.

Real estate brokerage firms can, without being a licensed securities brokerage firm, require that their dually licensed sales associates pay them a flat periodic fee under what is referred to as a "desk fee" arrangement to cover overhead and other expenses. But the securities activities of the sales associates must not affect the amount of compensation received by the real estate brokerage firms. In these arrangements, a licensed securities brokerage firm is required to have control and supervision over sales associates who are offering and selling the condo hotel units. Is it possible to obtain dual licenses as real estate and securities brokers? If so, what are the steps to take?

Podolosky: Yes. In fact, as noted above, the individual sales persons would need to be dually licensed as a sales associate of a licensed real estate brokerage firm and as a registered representative of a licensed securities brokerage firm. In addition, companies can be dually licensed as a real estate brokerage firm and as a securities brokerage firm.

Licensing requirements for real estate brokers are generally governed by the state laws where the firm is operating. Licensing requirements for securities brokers are governed by federal and state laws. FINRA is the primary regulatory authority responsible for reviewing licensing applications for securities brokers.

Applicants also must file a registration form with the SEC and there is a coordinated registration process with the relevant States. All registered securities brokerage firms also must be members of the Securities Investor Protection Corporation.

This article is reprinted with permission from


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Bilzin Sumberg | Attorney Advertising

Written by:

Bilzin Sumberg

Bilzin Sumberg on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.