Broker dealer business plan

Securities and exchange — main — main s and ment ic and risk al exam divisions and strative ns and adjudicatory ting and investigations strative law m final temporary orders and -regulatory out a broker or or alerts and a tip or y filing ting public ation for or to broker-dealer on of trading and markets1. Securities and exchange is required to to do if you think you may be a broker or a s and dealers generally must register with the sec. Associated persons" of a tate -dealers that limit their business to excluded and exempted -dealers must register before selling unregistered securities - including private placements (or regulation d offerings). Broker-dealer ements regarding brokers and dealers of government and municipal securities, including repurchase l rules that apply to banks and other financial nce agency estate securities and real estate brokers/-dealer relationships with affinity to register as a sor broker-dealer awal from registration; cancellation of t regulation of ility of best er confirmation sure of credit ctions on short sales (regulation sho). On insider ctions on private securities ts and regulation g by members of exchanges, brokers and ing credit on new execution tion ats: broker-dealer trading y of consumer financial information (regulation s-p). Adviser ial responsibility of of customer ed books, records and assessment ations and and stolen securities printing of electronic media by onic -money laundering of foreign assets ss continuity to get further securities exchange act of 1934 ("exchange act" or "act") governs the way in which the nation's securities markets and its brokers and dealers operate. 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 n — make sure you follow all laws and gh this guide highlights certain provisions of the act and our rules, it is not comprehensive. 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 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. Who is required to "brokers" and "dealers" must register with the sec and join a "self-regulatory organization," or sro. 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, n 3(a)(4)(a) of the act generally defines a "broker" broadly person engaged in the business of effecting transactions in securities for the account of mes 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. For example, each of the following individuals and businesses may need to register as a broker, depending on a number of factors:"finders," "business brokers," and other individuals or entities that engage in the following activities: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;. That provide support services to registered broker-dealers; s that act as "independent contractors," but are not "associated persons" of a broker-dealer (for information on "associated persons," see below). 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. 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? Yes" answer to any of these questions indicates that you may need to register as a a broker, who acts as agent, a dealer acts as principal. Section 3(a)(5)(a) of the act generally defines a "dealer" as:Any person engaged in the business of buying and selling securities for his own account, through a broker or 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 mes 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. For instance, each of the following individuals and businesses may need to register as a dealer, depending on a number of factors:A person who holds himself out as being willing to buy and sell a particular security on a continuous basis;. Person who issues or originates securities that he also buys and 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? Yes" answer to any of these questions indicates that you may need to register as a dealer.

Stock broker business plan

What to do if you think you may be a broker or a you are doing, or may do, any of the activities of a broker or dealer, you should find out whether you need to register. If you will be acting as a "broker" or "dealer," you must not engage in securities business until you are properly registered. If you are already engaged in the business and are not yet registered, you should cease all activities until you are properly registered. Brokers and dealers generally must register with the n 15(a)(1) of the act generally makes it unlawful for any broker or dealer to use the mails (or any other means of interstate commerce, such as the telephone, facsimiles, or the internet) to "effect any transactions in, or to induce or attempt to induce the purchase or sale of, any security" unless that broker or dealer is registered with the commission in accordance with section 15(b) of the act. In addition, we discuss the special registration requirements that apply to broker-dealers of government and municipal securities, including repurchase agreements, below. This is the case whether such individuals are employees, independent contractors, or are otherwise working with a broker-dealer. Although associated persons usually do not have to register separately with the sec, they must be properly supervised by a currently registered broker-dealer. To the extent that associated persons engage in securities activities outside of the supervision of their broker-dealer, they would have to register separately as broker-dealers. Broker-dealers must supervise the securities activities of their personnel regardless of whether they are considered "employees" or "independent contractors" as defined under state law. An unregistered entity that receives commission income in this situation must register as a broker-dealer. In those circumstances, the broker-dealer employer generally hires and supervises all aspects of the employees' work and uses the payroll and benefits administrator merely as a means to centralize personnel services. Broker-dealer that conducts all of its business in one state does not have to register with the sec. This means that, without sec registration, a broker-dealer cannot participate in any transaction executed on a national securities exchange. Broker-dealer that otherwise meets the requirements of the intrastate broker-dealer exemption would not cease to qualify for the intrastate broker-dealer exemption solely because it has a website that may be viewed by out-of-state persons, so long as the broker-dealer takes measures reasonably designed to ensure that its business remains exclusively intrastate. These measures could include the use of disclaimers clearly indicating that the broker-dealer's business is exclusively intrastate and that the broker-dealer can only act for or with, and provide broker-dealer services to, a person in its state, as long as the broker-dealer does not provide broker-dealer services to persons that indicate they are, or that the broker-dealer has reason to believe are, not within the broker-dealer's state of measures are not intended to be exclusive. A broker-dealer could adopt other measures reasonably designed to ensure that it does not provide broker-dealer services to persons that are not within the same state as the broker-dealer. However, an intermediary's business would not be "exclusively intrastate" if it sold securities or provided any other broker-dealer services to a person that indicates that it is, or that the broker-dealer has reason to believe is, not within the broker-dealer's state of residence. There is no intrastate exception from registration for municipal securities dealers or government securities brokers and dealers. Broker-dealer that transacts business only in commercial paper, bankers' acceptances, and commercial bills does not need to register with the sec under section 15(b) or any other section of the act. On the other hand, persons transacting business only in certain "exempted securities," as defined in section 3(a)(12) of the act, do not have to register under section 15(b), but may have to register under other provisions of the act. For example, some broker-dealers of government securities, which are "exempted securities," must register as government securities brokers or dealers under section 15c of the act, as described in part ii. For example, a person who sells securities that are exempt from registration under regulation d of the 1933 act must nevertheless register as a broker-dealer. Generally are not "brokers" because they sell securities for their own accounts and not for the accounts of others. Moreover, issuers generally are not "dealers" because they do not buy and sell their securities for their own accounts as part of a regular business. Issuers whose activities go beyond selling their own securities, however, need to consider whether they would need to register as broker-dealers.

The so-called issuer's exemption does not apply to the personnel of a company who routinely engage in the business of effecting securities transactions for the company or related companies (such as general partners seeking investors in limited partnerships). The employees and other related persons of an issuer who assist in selling its securities may be "brokers," especially if they are paid for selling these securities and have few other ge act rule 3a4-1 provides that an associated person (or employee) of an issuer who participates in the sale of the issuer's securities would not have to register as a broker-dealer if that person, at the time of participation: (1) is not subject to a "statutory disqualification," as defined in section 3(a)(39) of the act; (2) is not compensated by payment of commissions or other remuneration based directly or indirectly on securities transactions; (3) is not an associated person of a broker or dealer; and (4) limits its sales activities as set forth in the issuers offer dividend reinvestment and stock purchase programs. Under certain conditions, an issuer may purchase and sell its own securities through a dividend reinvestment or stock purchase program without registering as a broker-dealer. Requirements regarding brokers and dealers of government and municipal securities, including repurchase -dealers that limit their activity to government or municipal securities require specialized registration. Those that limit their activity to government securities do not have to register as "general-purpose" broker-dealers under section 15(b) of the act. General-purpose broker-dealers that conduct a government securities business, however, must note this activity on their form bd. All firms that are brokers or dealers in government securities must comply with rules adopted by the secretary of the treasury, as well as sec that limit their securities business to buying and selling municipal securities for their own account (municipal securities dealers) must register as general-purpose broker-dealers. Municipal securities brokers (other than banks) must register as general-purpose broker-dealers unless they qualify for the intrastate exception. 2 that run a matched book of repurchase agreements or other stock loans are considered dealers. Because a "book running dealer" holds itself out as willing to buy and sell securities, and is thus engaged in the business of buying and selling securities, it must register as a broker-dealer. As such, subsidiaries and affiliates of banks that engage in broker-dealer activities are required to register as broker-dealers under the act. Also, banks that act as municipal securities dealers or as government securities brokers or dealers continue to be required to register under the s. By statute, thrifts (savings associations) have the same status as banks, and may avail themselves of the same targeted exceptions and exemptions from broker-dealer registration as banks. For further information, see the "staff compliance guide to banks on dealer statutory exceptions and rules," noted above. As such, subsidiaries and affiliates of thrifts that engage in broker-dealer activities are required to register as broker-dealers under the unions and financial institution "networking" arrangements. The sec staff, however, has permitted certain financial institutions, such as credit unions, to make securities available to their customers without registering as broker-dealers. This is done through "networking" arrangements, where an affiliated or third-party broker-dealer provides brokerage services for the financial institution's customers, according to conditions stated in no-action letters and nasd rule a networking arrangement, financial institutions can share in the commissions generated by their referred customers, under certain conditions. See, for example, letter re: chubb securities corporation (november 24, 1993) and nasd rule 2350 (applicable to broker-dealers that enter into networking arrangements with banks, thrifts, and credit unions). Insurance agency sec staff has permitted insurance agencies to make insurance products that are also securities (such as variable annuities) available to their customers without registering as broker-dealers under certain conditions. This again is done through "networking" arrangements, where an affiliated or third-party broker-dealer provides brokerage services for the insurance agency's customers, according to conditions stated in no-action letters. Real estate securities and real estate brokers/ offer of real estate as such, without any collateral arrangements with the seller or others, does not involve the offer of a security. Broker-dealer relationships with affinity -dealers may enter into arrangements to offer services to members of certain non-profit groups, including civic organizations, charities, and educational institutions that rely upon private donations. Broker-dealer may not begin business until:It has properly filed form bd, and the sec has granted its registration;. Notice that you conduct government securities activities; for broker-dealer registration with each state in which you plan to do bd asks questions about the background of the broker-dealer and its principals, controlling persons, and employees. The broker-dealer must meet the statutory requirements to engage in a business that involves high professional standards, and quite often includes the more rigorous responsibilities of a apply for registration, you must file one executed copy of form bd through the central registration depository ("crd"), which is operated by finra.

The only exception is for banks registering as municipal securities dealers, which file form msd directly with the sec and with their appropriate banking regulator. A broker-dealer must comply with relevant state law as well as federal law and applicable sro rules. As such, when deciding to register as a broker-dealer, it is important to plan for the time required for processing federal, state, and sro registration or membership to update form bd. Thus, it must promptly update its form bd by filing amendments whenever the information on file becomes inaccurate or incomplete for any ited broker-dealer names. Title 18, section 709 of the united states code makes it a criminal offense to use the words "national," "federal," "united states," "reserve," or "deposit insurance" in the name of a person or organization in the brokerage business, unless otherwise allowed by federal law. Further, a broker-dealer name that is otherwise materially misleading would become subject to scrutiny under exchange act section 10(b), and rule 10b-5 thereunder, the general antifraud rules, and any other applicable provisions. Act defines an "associated person" of a broker-dealer as any partner, officer, director, branch manager, or employee of the broker-dealer, any person performing similar functions, or any person controlling, controlled by, or under common control with, the broker-dealer. A broker-dealer must file a form u-4 with the applicable sro for each associated person who will effect transactions in securities when that person is hired or otherwise becomes associated. These examinations require the series 7 exam as a : if you hold a series license, you must be properly associated with a registered broker-dealer to effect securities transactions. It is not sufficient merely to hold a series license when engaging in securities business. If you hold a series license and wish to start an independent securities business, or otherwise wish to effect securities transactions outside of an "associated person" relationship, you would first need to register as a broker-dealer. The sec may also cancel a broker-dealer's registration if it finds that the firm is no longer in existence or has ceased doing business as a ty futures, which are contracts of sale for future delivery of a single security or a narrow-based security index, are regulated as both securities by the sec and as futures by the commodity futures trading commission ("cftc"). As a result, firms that conduct business in security futures must be registered with both the sec and the cftc. Specifically, firms registered as general purpose broker-dealers under section 15(b) of the act may "notice" register with the cftc. Likewise, futures commission merchants and introducing brokers registered with the cftc may notice register with the sec. However, futures commission merchants or introducing brokers that conduct a business in securities other than security futures must be registered as general-purpose broker-dealers. Conduct regulation of -dealers, like other securities market participants, must comply with the general "antifraud" provisions of the federal securities laws. Broker-dealers must also comply with many requirements that are designed to maintain high industry standards. Hanging out the broker-dealer's business sign, or "shingle"), a broker-dealer represents to its customers that it will deal fairly with them, consistent with the standards of the profession. Based on this important representation, the sec, through interpretive statements and enforcement actions, and the courts, through case law, have set forth over time certain duties for broker-dealers. These rules generally require broker-dealers to observe high standards of commercial honor and just and equitable principles of trade in conducting their business. Suitability -dealers generally have an obligation to recommend only those specific investments or overall investment strategies that are suitable for their customers. Under suitability requirements, a broker-dealer must have an "adequate and reasonable basis" for any recommendation that it makes. Therefore, the broker-dealer has an obligation to investigate and obtain adequate information about the security it is recommending. In particular, a broker-dealer must make recommendations based on a customer's financial situation, needs, and other security holdings.

This requirement has been construed to impose a duty of inquiry on broker-dealers to obtain relevant information from customers relating to their financial situations and to keep such information current. Duty of best duty of best execution, which also stems from the act's antifraud provisions, requires a broker-dealer to seek to obtain the most favorable terms available under the circumstances for its customer orders. This applies whether the broker-dealer is acting as agent or as sro rules also include a duty of best execution. Broker-dealer must provide its customers, at or before the completion of a transaction, with certain information, including:The date, time, identity, price, and number of shares involved;. Source and amount of any third party remuneration it has received or will receive; information, both general (such as, if the broker-dealer is not a sipc member) and transaction-specific (such as the yield, in most transactions involving debt securities). Broker-dealer may also be obligated under the antifraud provisions of the act to disclose additional information to the customer at the time of his or her investment decision. Dealers must notify customers purchasing securities on credit about the credit terms and the status of their accounts. A broker-dealer must establish procedures for disclosing this information before it extends credit to a customer for the purchase of securities. A broker-dealer must give the customer this information at the time the account is opened, and must also provide credit customers with account statements at least quarterly. Some of the goals of regulation sho include:Establishing uniform "locate" and "close-out" requirements in order to address problems associated with failures to deliver, including potentially abusive "naked" short requirement: regulation sho requires a broker-dealer to have reasonable grounds to believe that the security can be borrowed so that it can be delivered on the date delivery is due before effecting a short sale order in any equity security. Close-out" requirement: regulation sho imposes additional delivery requirements on broker-dealers for securities in which there are a relatively substantial number of extended delivery failures at a registered clearing agency ("threshold securities"). For instance, with limited exception, regulation sho requires brokers and dealers that are participants of a registered clearing agency to take action to "close-out" failure-to-deliver positions ("open fails") in threshold securities that have persisted for 13 consecutive settlement days. Closing out requires the broker or dealer to purchase securities of like kind and quantity. Until the position is closed out, the broker or dealer and any broker or dealer for which it clears transactions (for example, an introducing broker) may not effect further short sales in that threshold security without borrowing or entering into a bona fide agreement to borrow the security (known as the "pre-borrowing" requirement). 101 of regulation m generally prohibits underwriters, broker-dealers and other distribution participants from bidding for, purchasing, or attempting to induce any person to bid for or purchase, any security which is the subject of a distribution until the applicable restricted period has ended. An offering's "restricted period" begins either one or five business days (depending on the trading volume value of the offered security and the public float value of the issuer) before the day of the offering's pricing and ends upon completion of the 101 contains various exceptions that are designed to permit an orderly distribution of securities and limit disruption in the market for the securities being distributed. 102 of regulation m prohibits issuers, selling security holders, and their affiliated purchasers from bidding for, purchasing, or attempting to induce any person to bid for or purchase, any security which is the subject of a distribution until after the applicable restricted 103 of regulation m governs passive market making by broker-dealers participating in an offering of a nasdaq 104 of regulation m governs stabilization transactions, syndicate short covering activity, and penalty 105 of regulation m prevents manipulative short sales prior to pricing an offering by prohibiting the purchase of offering securities if a person sold short the security that is the subject of the offering during the rule 105 restricted period. Section 15(f) of the act specifically requires broker-dealers to have and enforce written policies and procedures reasonably designed to prevent their employees from misusing material non-public information. Because employees in the investment banking operations of broker-dealers frequently have access to material non-public information, firms need to create procedures designed to limit the flow of this information so that their employees cannot use the information in the trading of securities. Broker-dealers can use these information barriers as a defense to a claim of insider trading. In addition, private securities transactions of an associated person may be subject to an analysis under exchange act section 10(b) and rule 10b-5, as well as the broker-dealer supervisory provisions of section 15(f) (described in part v. Analysts and regulation tion ac (or regulation analyst certification) requires brokers, dealers, and persons associated with brokers or dealers that publish, distribute, or circulate research reports to include in those reports a certification that the views expressed in the report accurately reflect the analyst's personal views. If the analyst has received related compensation, the broker, dealer, or associated person must disclose its amount, source, and purpose. Regulation ac applies to all brokers and dealers, as well as to those persons associated with a broker or dealer that fall within the definition of "covered person. Regulation ac also requires that broker-dealers keep records of analyst certifications relating to public addition to commission rules, analyst conduct is governed by sro rules, such as nasd rule 2711 and nyse rule 472.

Dealers that are members of national securities exchanges are subject to additional regulations regarding transactions they effect on exchanges. 11(d)(1) of the act generally prohibits a broker-dealer that participates in the distribution of a new issue of securities from extending credit to customers in connection with the new issue during the distribution period and for 30 days thereafter. Sales by a broker-dealer of mutual fund shares and variable insurance product units are deemed to constitute participation in the distribution of a new issue. Therefore, purchase of mutual fund shares or variable product units using credit extended or arranged by the broker-dealer during the distribution period is a violation of section 11(d)(1). However, exchange act rule 11d1-2 permits a broker-dealer to extend credit to a customer on newly sold mutual fund shares and variable insurance product units after the customer has owned the shares or units for 30 n 11(d)(2) of the act requires a broker-dealer to disclose in writing, at or before the completion of each transaction with a customer, whether the broker-dealer is acting in the capacity of broker or dealer with regard to the tion nms addresses four interrelated topics that are designed to modernize the regulatory structure of the u. In addition, amendments to the joint industry plans for disseminating market information modify the formulas for allocating plan revenues among the self-regulatory organizations and broaden participation in plan tion nms also updates and streamlines the existing exchange act rules governing the national market system previously adopted under section 11a of the exchange act, and consolidates them into a single regulation. Dealers that are exchange specialists or nasdaq market makers must comply with particular rules regarding publishing quotes and handling customer orders. These two types of broker-dealers have special functions in the securities markets, particularly because they trade for their own accounts while also handling orders for customers. The quote information that the specialist or market maker provides must reflect the best prices at which he is willing to trade (the lowest price the dealer will accept from a customer to sell the securities and the highest price the dealer will pay a customer to purchase the securities). Provides a means for broker-dealers to operate automated trading platforms, to collect and execute orders in securities electronically, without registering as a national securities exchange under section 6 of the exchange act or as an exempt exchange pursuant to section 5 of the act. To the extent that an ats or the sponsoring broker-dealer seeks to establish conduct or disciplinary rules, the entity may be required to register as a national securities exchange or obtain a commission exemption from exchange registration based on limited trading order to acquire the status of an ats, a firm must first be registered as a broker-dealer, and it must file an initial operation report with respect to the trading system on form ats at least 20 days before commencing operation. Broker-dealers that effect transactions in "penny stocks" have certain enhanced suitability and disclosure obligations to their customers. Penny stocks include the equity securities of private companies with no active trading market if they do not qualify for one of the exclusions from the definition of penny a broker-dealer that does not qualify for an exemption9 may effect a solicited transaction in a penny stock for or with the account of a customer it must: (1) provide the customer with a risk disclosure document, as set forth in schedule 15g, and receive a signed and dated acknowledgement of receipt of that document from the customer (see rule 15g-2); (2) approve the customer's account for transactions in penny stocks, provide the customer with a suitability statement, and receive a signed a dated copy of that statement from the customer; and (3) receive the customer's written agreement to the transaction (see rule 15g-9). The broker-dealer also must wait at least two business days after sending the customer the risk disclosure document and the suitability statement before effecting the transaction. In addition, exchange act rules 15g-3 through 15g-6 generally require a broker-dealer to give each penny stock customer:Information on market quotations and, where appropriate, offer and bid prices;. Aggregate amount of cash compensation that any associated person of the broker-dealer, who is a natural person and who has communicated with the customer concerning the transaction at or prior to the customer’s transaction order, other than a person whose function is solely clerical or ministerial, has received or will receive from any source in connection with the transaction; y account statements showing the market value of each penny stock held in the customer’s account. Dealers, including foreign broker-dealers registered with the commission and unregistered broker-dealers in the united states, must comply with regulation s-p, (see 17 cfr part 248) even if their consumers are non-u. Offices or tion sp generally requires a broker-dealer to provide its customers with initial, annual and revised notices containing specified information about the broker-dealer's privacy policies and practices. These notices must be clear and conspicuous, and must accurately reflect the broker-dealer's policies and practices. Before disclosing nonpublic personal information about a consumer to a nonaffiliated third party, a broker-dealer must first give a consumer an opt-out notice and a reasonable opportunity to opt out of the disclosure. In addition, it includes a safeguards rule that requires a broker-dealer to adopt written policies and procedures for administrative, technical, and physical safeguards to protect customer records and information. Further, it includes a disposal rule that requires a broker-dealer (other than a broker-dealer registered by notice with the commission to engage solely in transactions in securities futures) that maintains or possesses consumer report information for a business purpose to take reasonable measures to protect against unauthorized access to or use of the information in connection with its disposal. Investment adviser nt to the rules of self-regulatory organizations, broker-dealers are required to arbitrate disputes with their customers, if the customer chooses to arbitrate. Financial responsibility of -dealers must meet certain financial responsibility requirements, including:Maintaining minimum amounts of liquid assets, or net capital;. Purpose of this rule is to require a broker-dealer to have at all times enough liquid assets to promptly satisfy the claims of customers if the broker-dealer goes out of business.

Under this rule, broker-dealers must maintain minimum net capital levels based upon the type of securities activities they conduct and based on certain financial ratios. For example, broker-dealers that clear and carry customer accounts generally must maintain net capital equal to the greater of $250,000 or two percent of aggregate debit items. Broker-dealers that do not clear and carry customer accounts can operate with lower levels of net capital. Dealers that use customers' free credit balances in their business must establish procedures to provide specified information to those customers, including:The amount due to those customers;. Fact that such funds are not segregated and may be used by the broker-dealer in its business; fact that such funds are payable on demand of the customer. Under the rule, a broker-dealer must have possession or control of all fully-paid or excess margin securities held for the account of customers, and determine daily that it is in compliance with this requirement. The broker-dealer must also make periodic computations to determine how much money it is holding that is either customer money or obtained from the use of customer securities. If this amount exceeds the amount that it is owed by customers or by other broker-dealers relating to customer transactions, the broker-dealer must deposit the excess into a special reserve bank account for the exclusive benefit of customers. Required books, records, and reports (rules 17a-3, 17a-4, 17a-5, 17a-11)-dealers must make and keep current books and records detailing, among other things, securities transactions, money balances, and securities positions. Broker-dealers also must file with the sec periodic reports, including quarterly and annual financial statements. In addition, broker-dealers must notify the sec and the appropriate sro12 regarding net capital, recordkeeping, and other operational problems, and in some cases file reports regarding those problems, within certain time periods. Broker-dealers must maintain and preserve certain information regarding those affiliates, subsidiaries and holding companies whose business activities are reasonably likely to have a material impact on their own financial and operating condition (including the broker-dealer's net capital, liquidity, or ability to conduct or finance operations). The appropriate sro generally inspects newly-registered broker-dealers for compliance with applicable financial responsibility rules within six months of registration, and for compliance with all other regulatory requirements within twelve months of registration. A broker-dealer must permit the sec to inspect its books and records at any reasonable time. Every partner, officer, director, or employee of a broker-dealer must be fingerprinted and submit his or her fingerprints to the u. This requirement does not apply, however, to broker-dealers that sell only certain securities that are not ordinarily evidenced by certificates (such as mutual funds and variable annuities) or to persons who do not sell securities, have access to securities, money or original books and records, and do not supervise persons engaged in such activities. Broker-dealers may obtain fingerprint cards from their sro and should submit completed fingerprint cards to the sro for forwarding to the fbi on behalf of the attorney general. Use of electronic media by commission has issued two interpretive releases discussing the issues that broker-dealers should consider in using electronic media for delivering information to customers. The broker-dealer take reasonable precautions to ensure the integrity, confidentiality, and security of any personal financial information? Dealers should also consider the impact, if any, that the electronic signatures in global and national commerce act (commonly known as e-sign), pub. Anti-money laundering -dealers have broad obligations under the bank secrecy act ("bsa")13 to guard against money laundering and terrorist financing through their firms. The bsa, its implementing regulations, and rule 17a-8 under the exchange act require broker-dealers to file reports or retain records relating to suspicious transactions, customer identity, large cash transactions, cross-border currency movement, foreign bank accounts and wire transfers, among other bsa, as amended by the usa patriot act, as well as sro rules (e. Nasd rule 3011 and nyse rule 445), also requires all broker-dealers to have anti-money laundering compliance programs in place. Office of foreign assets -dealers have an obligation to comply with the sanctions programs administered by the department of treasury's office of foreign assets control (ofac). Ofac acts under presidential wartime and national emergency powers, as well as authority granted by specific legislation, to impose controls on transactions and freeze foreign assets under us 's sanctions programs are separate and distinct from, and in addition to, the anti-money laundering requirements imposed under the bsa on broker-dealers.

Business continuity commission, federal reserve board, and comptroller of the currency published an interagency white paper emphasizing the importance of core clearing and settlement organizations and establishing guidelines for their capacity and ability to restore operations within a short time of a wide-scale disruption. Separately, the commission also published a policy statement urging the organized securities markets to improve their business continuity arrangements,21 and encouraging sro-operated markets and electronic communications networks, or ecns to establish plans to enable the restoration of trading no later than the business day following a wide-scale . Where to get further general questions regarding broker-dealer registration and regulation:Office of interpretation and on of trading and markets. Wish to stress that we have published this guide as an introduction to the federal securities laws that apply to brokers and dealers. Flickr 6linkedin 7 pinterest 8 email are herehomefor industry professionalsregistration and qualificationbroker-dealer firm registrationregister a new broker-dealer firmafter you rds for will consider, as a whole, the applicant’s business plan, information and documents submitted by the applicant under nasd rule requirements, information provided during the membership interview, as well as information obtained by the staff, taking into account the following standards set forth in nasd rule 1014:I. Required examinations will be determined based upon the position in an applicant’s business that the individual will occupy. The applicant may, however, request, in writing, a waiver or exemption from the two principal requirement based on its proposed business in accordance with nasd rule 9610. The decision for granting such a waiver will be made by finra district office registrations based on type of applicant’s proposed business activities usually dictate the applicable registration requirements. For example, if the applicant intends to conduct business in options or municipal securities, it will be required to have the appropriate individuals maintain the necessary options or municipal principal pal registration is required for persons associated with a member who are actively involved in the management of the member's investment banking securities business. Indications of control include participation in the management of the broker/dealer and assertion of authority over daily operations. Also, an individual contributing capital but not involved in the operations or management of the broker/dealer does not necessarily need to be registered as a aneous or multiple securities registrations with separate finra member does not preclude an individual from being simultaneously registered with more than one member firm. To accommodate these unique circumstances, the finra district office staff may, on review, permit an insurance company to appoint as executive representative a registered principal serving in an equivalent position to senior management in charge of the insurance company’s securities securities regulatory agency registration purposes of finra membership admission, the broker/dealer and its principals must be registered in the state in which the firm’s home office is located. However, under state law the broker/dealer, principals, and each registered representative must be registered in each and every state in which a securities business will be conducted. Contractual or other arrangements and business the time the application is submitted or shortly thereafter, the applicant should be in a position to describe the contractual or other arrangements and other business relationships that will allow the applicant to operate in accordance with the business plan as submitted. The applicant is also required to submit copies of all draft or final agreements for the proposed business, including those with banks, clearing entities, or service bureaus. Business finra district office staff’s consideration of the adequacy of the applicant’s facilities or planned facilities will include not only the obvious ones, such as office space, computer equipment, etc. But will also take into account the location of such facilities to determine whether the applicant’s business plan can be effected with adequate supervision for the public’s district office staff will consider whether the applicant’s facilities or planned facilities, taken as a whole, will be sufficient to effectively carry out the business plan and to allow for the operation of the applicant’s proposed business activities in compliance with all relevant securities rules and . Adequacy of communications and operational communications and operational systems that the applicant intends to employ for the purpose of conducting business with customers and other members must be adequate and provide reasonably for business continuity with respect to: system capacity to handle the anticipated level of usage; contingency plans in the event of systems or other technological or communications problems or failures that may impede customer usage or firm order entry or execution; system redundancies; disaster recovery plans; system security; disclosures to be made to potential and existing customers who may use such systems; and supervisory or customer protection measures that may apply to customer use of, or access to, such applicant will be required to review its communications and operational systems and certify to the finra district office that these systems are adequate for the proposed business. These are two of the key financial responsibility rules of the sec, and finra members must strictly comply with these provisions at all ance with net capital sec’s net capital rule requires a minimum amount of net capital dictated by the type or method of business to be conducted, the securities products involved, and considerations of customer exposure. Applicants should carefully review the sec’s net capital rule, which can be found in the nasd manual under sec rule reporting rule 17a-11 requires broker/dealers to make accelerated financial reporting anytime net capital falls below 120 percent of its minimum capital level. In instances where the applicant’s capital falls below the minimum capital required, the broker/dealer is required to immediately notify both finra and the sec. Key document reviewed by the finra district office staff in connection with the application for membership is the applicant’s business plan. Among other things, this plan must include a detailed description of projected revenues that will be generated by the business operation and the costs expended in pursuit of those revenues, as well as any forms of capital contributed including a basis for the remain operational, a member’s capital will need to be sufficient to meet the projected expenses net of reliable revenues. Such an event could jeopardize the member’s amount of capital necessary to meet the net expenses will depend on the forecast contained in the applicant’s business te funds to meet contractual obligations, including market instances where a firm makes markets, it makes a commitment to buy or sell securities at stated prices. Thus, the required amount of capital will depend upon the number of markets to be made, the relative price range of such securities, and consideration for the historical volatility of these not directly related to these risk factors, a broker/dealer will also be required to have capital of an amount of $1,000 to $2,500 based on each market made taking into consideration the price of each such security as referenced in the sec’s net capital rule (sec rule 15c3-1(a)(4)).

It is, therefore, in the applicant’s best interest to make certain that the financial and operational portions of the business are operated as efficiently as possible and in compliance with applicable applicant must demonstrate that it can prepare, in a thorough and accurate manner, all reports pertaining to the financial condition of the firm and meet the requisite deadlines and times for their adequacy of the financial controls includes the ability of those employees of the applicant who will perform such functions to meet these . Control mechanisms consistent with industry applicant must demonstrate that its compliance, supervisory, operational, and internal control practices and standards are consistent with practices and standards regularly employed in the investment banking or securities business in light of the applicant's proposed example, the supervisory control practices and standards of a securities business should include, but not be limited to, the delegation to qualified principals or other registered employees responsibility and authority for supervision and control of each office, department or business activity, and the establishment of appropriate procedures for supervision and control; and implementation of a separate system of follow–up and review to verify that the delegated authority and responsibility is being properly rly, an applicant which proposes to engage in investment banking activities would be required to demonstrate that consistent with the practices and standards regularly employed by the industry, it has developed and implemented policies and procedures to establish effective internal control systems and procedures to prevent the trading department from utilizing advance knowledge of the issuance of a research report. The establishment of appropriate and effective written supervisory procedures is left to each member firm in the context of its business mix and method of operation, among other factors. A firm’s procedures must be tailored to its business and cover all aspects of its operations. The procedures should set forth the designation of: appropriately registered principals for each type of business the firm is engaged in, any office meeting the definition of office of supervisory jurisdiction (osj), at least one appropriately registered principal for each osj, and at least one registered representative or principal to be responsible for supervision in each non-osj branch office. Written supervisory procedures for applicants that propose to engage in an options business must facilitate compliance with nasd rule 2860 (options conduct rule), and if the applicant plans to conduct a municipal securities business, the procedures must cover steps to be followed by the firm to comply with msrb number, location, experience, and qualifications of supervisory applicant’s internal supervisory controls are the first line of defense for the protection of customers. Note: nasd rule 1014(a)(10)(d) requires that each person identified in the applicant’s business plan who will discharge a supervisory function should have at least one year of direct experience or two years of related experience in the subject area proposed to be supervised by such persons. The first proposed supervisor, a retired military officer, had been associated with a broker-dealer applicant that was never approved for membership; he had studied with a trader for three days. The firm also proposed a business professor with ten years of supervisory experience, but offered no evidence that any of this experience involved trading or market making. Recordkeeping various federal and state securities rules pertaining to the recordkeeping systems of a broker/dealer rarely specify a particular format to maintain such information. Rather, the rules specify only that certain information must be created and maintained within the broker/dealer’s records. The methods employed by member firms vary widely depending on the size of the business, the specific products involved, and the volume of business example, a small retailer of mutual funds may employ the documents that are used in transmitting application-type mutual fund orders as the basis for the records themselves. Also, a large number of member firms contract with other broker/dealers to perform such services. The rule involves a two-part mandatory program that requires: periodic uniform training in regulatory matters (regulatory element), and ongoing programs by broker/dealers to keep employees up-to-date on job- and product-related subjects (firm element). Finra is a registered trademark of the financial industry regulatory authority, to starting up an independent broker dan moskowitz | may 12, 2015 — 5:36 pm you want to become a broker-dealer? That might make this sound like an easy decision but keep in mind that you are doing all the work, especially in the early days, to keep the business running. Biggest advantages to starting your own broker-dealer are that there is no unnecessary bureaucracy, you have the freedom to do things your own way, and there is potential for significant wealth. You will need a scalable business, experienced management personnel able to lead and successfully navigate through difficult times, capital, and the correct licenses and memberships, including:Licenses to sell investment ial industry regulatory authority (finra) ties investor protection corporation (sipc) ed form bd from the securities and exchange commission (sec). If you already keep personal costs low and you’re doing well at your current broker-dealer, then it makes for an easier transition. Your available capital will pile up quickly, which will lead to a less risky venture in your own broker-dealer. To deter you from this venture, but you should also know that most new broker-dealers lose money in their first year, with the average range between 10% and 20%. Bd allows the sec to review your personal and professional information and background, review information on your business partners and employees, and helps them determine if there are any conflicts of interest. The sec wants to see high professional standards, fiscal responsibility, details on the types of securities that will be sold, organizational and operational structure of the business, and a list of states where products will be sold. Forms u-4 and u-5 (used by broker-dealers to register with or withdraw their registration from the sec, sros, and jurisdictions). Business of agreements with banks, clearing agents, and service ption of supervisory n supervisory -money laundering ption of firm’s continuing education of the above information can be overwhelming, and finra has a reputation for ongoing requests for documentation and constant back-and-forth communications.

However, if you get through the approval process and then plan your work and work your plan, the potential rewards for a successful broker-dealer are exceptionally high. 2017, investopedia, to starting up an independent broker dan moskowitz | may 12, 2015 — 5:36 pm you want to become a broker-dealer?