Sea Change at SEC regarding PSEs: Birchtree Overruled

For decades, the SEC Division of Market Regulation staff reiterated its long-held position that an unregistered entity, even a Personal Services Entity (PSE) controlled by a registered representative, cannot receive transaction-related compensation like commissions without registering as a broker-dealer. The SEC routinely denied requests for no-action relief stating that receipt of commissions was seen as a key characteristic of acting as a broker-dealer. An oft-cited example was the September 22, 1998, SEC no-action letter denying a no-action request from a registered representative associated with Birchtree Financial Services.

That worldview ended on November 17, 2025.

Clifford Kirsch, Partner, Eversheds Sutherland law firm, and Lead of Investment Services group, received no-action relief for the Financial Services Institute. The relief permits a registered representative-owned personal services entity (PSE) to receive transaction-based compensation without registering as a broker-dealer. The SEC letter can be seen HERE