We use cookies to improve security, personalize the user experience,
enhance our marketing activities (including cooperating with our marketing partners) and for other
business use.
Click "here" to read our Cookie Policy.
By clicking "Accept" you agree to the use of cookies. Read less
The term broker or dealer refers to a company that is authorized to engage in the business of buying and selling securities. This includes activities such as brokering transactions, underwriting securities, or dealing in securities within the United States. Additionally, it encompasses affiliated companies that enter into netting contracts, as determined by the Board of Governors of the Federal Reserve System. Essentially, these entities play a critical role in the financial markets by facilitating the trading of securities.
Table of content
Legal Use & context
In legal practice, the terms broker and dealer are primarily used in the context of securities regulation. They are relevant in areas such as:
Financial services law
Corporate law
Investment law
Individuals or companies acting as brokers or dealers must comply with various federal and state regulations. Users can manage some aspects of these legal requirements by utilizing legal templates available through US Legal Forms, drafted by qualified attorneys.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
Example 1: A financial firm that buys and sells stocks on behalf of clients is considered a broker. They facilitate transactions and earn commissions on each trade.
Example 2: A company that underwrites new stock issues for corporations is classified as a dealer, as they buy the securities and sell them to investors (hypothetical example).
Relevant laws & statutes
Key statutes that govern brokers and dealers include:
Investment Company Act of 1940
Securities Exchange Act of 1934
Federal Securities Laws
State-by-state differences
State
Broker/Dealer Regulations
California
Requires additional state licensing for brokers.
New York
Has specific regulations regarding fiduciary duties of brokers.
Texas
Offers a streamlined licensing process for brokers.
This is not a complete list. State laws vary, and users should consult local rules for specific guidance.
Comparison with related terms
Term
Definition
Difference
Broker
A person or firm that arranges transactions between buyers and sellers.
Focuses on facilitating trades rather than holding securities.
Dealer
A person or firm that buys and sells securities for their own account.
Acts as a principal in transactions, holding inventory of securities.
Common misunderstandings
What to do if this term applies to you
If you are considering becoming a broker or dealer, it is essential to understand the licensing requirements in your state. You may want to:
Research the specific regulations that apply to your state.
Consider using US Legal Forms to access templates for necessary applications.
Consult a legal professional if you have complex questions or need personalized advice.
Find the legal form that fits your case
Browse our library of 85,000+ state-specific legal templates.