One key to success is to employ a management team that is good at keeping costs low without sacrificing growth potential; this is a fine line that very few people have the ability to toe. However, it takes the average business in any industry three years to be profitable.
We have prepared this guide to summarize some of the significant provisions of the Act and its rules. You will find information about whether you need to register as a broker-dealer and how you can register, as well as the standards of conduct and the financial responsibility rules that broker-dealers must follow.
Brokers and dealers, and their associated persons, must comply with all applicable requirements, including those of the U.
Securities and Exchange Commission "SEC" or "Commission"as well as the requirements of any self-regulatory organizations to which the brokers and dealers belong, and not just those summarized here. The SEC staff stands ready to answer your questions and help you comply with our rules. After reading this guide, if you have questions, please feel free to contact the Office of Interpretation and Guidance at e-mail tradingandmarkets sec.
You may wish to consult with a private lawyer who is familiar with the federal securities laws, to assure that you comply with all laws and regulations. While the staff attempts to provide guidance by telephone to individuals who are making inquiries, the guidance is informal and not binding.
This section covers the factors that determine whether a person is a broker or dealer. It also describes the types of brokers and dealers that do not have to register with the SEC. Self-regulatory organizations are described in Part III, below.
A note about banks: The Exchange Act also contains special provisions relating to brokerage and dealing activities of banks. Please see Sections 3 a 4 B and 3 a 5 C and related provisions, and consult with counsel. Bank brokerage activity is addressed in Regulation R, which was adopted jointly by the Commission and the Board of Governors of the Federal Reserve System.
See Exchange Act Release No. Who is a "Broker" Section 3 a 4 A of the Act generally defines a "broker" broadly as any person engaged in the business of effecting transactions in securities for the account of others.
Sometimes you can easily determine if someone is a broker. For instance, a person who executes transactions for others on a securities exchange clearly is a broker. However, other situations are less clear. For example, each of the following individuals and businesses may need to register as a broker, depending on a number of factors: Finding investors or customers for, making referrals to, or splitting commissions with registered broker-dealers, investment companies or mutual funds, including hedge funds or other securities intermediaries; Finding investment banking clients for registered broker-dealers; Finding investors for "issuers" entities issuing securitieseven in a "consultant" capacity; Engaging in, or finding investors for, venture capital or "angel" financings, including private placements; Finding buyers and sellers of businesses i.
In order to determine whether any of these individuals or any other person or business is a broker, we look at the activities that the person or business actually performs.
You can find analyses of various activities in the decisions of federal courts and our own no-action and interpretive letters.
Here are some of the questions that you should ask to determine whether you are acting as a broker: Do you participate in important parts of a securities transaction, including solicitation, negotiation, or execution of the transaction?
Does your compensation for participation in the transaction depend upon, or is it related to, the outcome or size of the transaction or deal?
Do you receive trailing commissions, such as 12b-1 fees? Do you receive any other transaction-related compensation? Are you otherwise engaged in the business of effecting or facilitating securities transactions? Do you handle the securities or funds of others in connection with securities transactions?
A "yes" answer to any of these questions indicates that you may need to register as a broker. Who is a "Dealer" Unlike a broker, who acts as agent, a dealer acts as principal. Section 3 a 5 A of the Act generally defines a "dealer" as: The definition of "dealer" does not include a "trader," that is, a person who buys and sells securities for his or her own account, either individually or in a fiduciary capacity, but not as part of a regular business.
Individuals who buy and sell securities for themselves generally are considered traders and not dealers. Sometimes you can easily tell if someone is a dealer. For example, a firm that advertises publicly that it makes a market in securities is obviously a dealer. Other situations can be less clear.
For instance, each of the following individuals and businesses may need to register as a dealer, depending on a number of factors: Here are some of the questions you should ask to determine whether you are acting as a dealer: Do you advertise or otherwise let others know that you are in the business of buying and selling securities?
The following checklist helps identify the basic requirements for members under the new and amended recordkeeping requirements to the SEC broker/dealer books and records rules. Former Morgan Stanley broker ignored the firm’s denial of his requests to buy mobile home and fuel-service businesses, but others stumble over less obvious business and investment reporting. Programs are customized to fit a variety of broker-dealer business models and trade programs. Use compliance outsourcing to supplement staff; while adding expertise for a fraction of the cost and gaining access to a professional compliance consulting firm. Business Continuity Plan. RND Resources Inc., affiliates, and staff, are not.
Do you do business with the public either retail or institutional?Broker/Dealer Branch Offices. There Are Three Types – Can You Name All Three?. by Warren Forest.
As anyone who has been in the securities business for any length of time knows, there is nothing simple about this industry. The following checklist helps identify the basic requirements for members under the new and amended recordkeeping requirements to the SEC broker/dealer books and records rules.
Steps to Starting Up an Independent Broker Dealer which will lead to a less risky venture in your own broker-dealer. FINRA essentially wants to know that your Comprehensive business plan. Programs are customized to fit a variety of broker-dealer business models and trade programs.
Use compliance outsourcing to supplement staff; while adding expertise for a fraction of the cost and gaining access to a professional compliance consulting firm. Business Continuity Plan. RND Resources Inc., affiliates, and staff, are not.
This document provides a comprehensive guide to Broker-Dealer registration, including the laws, rules, and regulations. apply for broker-dealer registration with each state in which you plan to do business.
SROs assist the SEC in regulating the activities of broker-dealers. FINRA and the national securities exchanges are all SROs. If a. For further information on Anti-Money Laundering requirements, please visit the FINRA Anti-Money Laundering (AML) page..
General Requirements. 1. What is .