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Understanding Stock Brokers and Dealers: Definitions and Roles in Finance
Definition & Meaning
Stock brokers and dealers are individuals or entities that facilitate the buying and selling of securities. A stock broker acts as an agent for clients, executing trades on their behalf, while a dealer buys and sells securities for their own account. Registration with the U.S. Securities and Exchange Commission (SEC) is typically required for both roles, depending on specific activities and circumstances.
Table of content
Legal Use & context
In legal practice, stock brokers and dealers operate within the realm of securities law. This area encompasses regulations governing financial transactions, investment practices, and the conduct of market participants. Users can manage their own securities transactions or seek assistance through legal templates provided by services like US Legal Forms, which can help in drafting necessary documents.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
Example 1: A financial advisor who executes trades for clients in exchange for a commission is acting as a stock broker.
Example 2: A firm that buys shares of a company to sell them later at a profit operates as a dealer. (hypothetical example)
Relevant laws & statutes
Key regulations governing stock brokers and dealers include:
The Securities Exchange Act of 1934, which established the SEC and regulates securities transactions.
Investment Advisers Act of 1940, which governs the conduct of investment advisors.
State-by-state differences
State
Broker/Dealer Requirements
California
Requires state registration in addition to SEC registration.
New York
Has specific licensing requirements for brokers and dealers.
Texas
Requires registration with the Texas State Securities Board.
This is not a complete list. State laws vary and users should consult local rules for specific guidance.
Comparison with related terms
Term
Definition
Broker
An agent who executes transactions on behalf of clients.
Dealer
A principal who buys and sells securities for their own account.
Trader
A person who buys and sells securities for their own account, but not as part of a regular business.
Common misunderstandings
What to do if this term applies to you
If you are engaging in activities that may classify you as a stock broker or dealer, consider the following steps:
Evaluate your activities to determine if registration with the SEC is necessary.
Consult with a legal professional to ensure compliance with applicable laws.
Explore US Legal Forms for templates that can assist with the registration process.
Find the legal form that fits your case
Browse our library of 85,000+ state-specific legal templates.