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Understanding Covered Broker or Dealer [Banks & Banking]: A Legal Overview
Definition & Meaning
A covered broker or dealer is a type of financial institution that operates as a broker or dealer and meets specific regulatory requirements. According to U.S. law, a covered broker or dealer must be registered with the Securities and Exchange Commission (SEC) under the Securities Exchange Act of 1934 and must also be a member of the Securities Investor Protection Corporation (SIPC). This designation helps ensure that the broker or dealer adheres to certain standards of financial responsibility and investor protection.
Table of content
Legal Use & context
The term "covered broker or dealer" is primarily used in the context of securities regulation and financial oversight. It is relevant in legal practices related to finance, investment, and consumer protection. Understanding this term is crucial for individuals and businesses engaging in securities transactions, as it defines the regulatory framework that governs their operations. Users can manage related forms and procedures through platforms like US Legal Forms, which offer templates drafted by qualified attorneys.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
1. A brokerage firm that facilitates the buying and selling of stocks and bonds, registered with the SEC and a member of SIPC, qualifies as a covered broker or dealer.
2. A financial advisory company that provides investment advice and is also registered with the SEC and a member of SIPC, operates as a covered broker or dealer. (hypothetical example)
Relevant laws & statutes
The primary statute governing covered brokers or dealers is the Securities Exchange Act of 1934, particularly section 15(b). This law outlines the registration requirements and operational standards for brokers and dealers in the securities industry.
Comparison with related terms
Term
Definition
Key Differences
Broker
A person or firm that executes buy and sell orders for clients.
A broker may not necessarily be a covered broker or dealer unless they meet specific regulatory requirements.
Dealer
A firm that buys and sells securities for its own account.
Dealers can operate independently of the covered broker or dealer designation unless they meet the criteria.
Common misunderstandings
What to do if this term applies to you
If you are considering using the services of a broker or dealer, ensure they are a covered broker or dealer by checking their registration with the SEC and their membership with SIPC. If you need assistance with related legal forms or procedures, explore the templates available at US Legal Forms. For complex situations, consider consulting a legal professional for tailored advice.
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