“What Is” A Broker-Dealer?

brokerdealerIn securities trading, the term broker-dealer refers to individuals or firms that facilitate the buying and selling of securities. The “broker” half of the term refers to when firms act as agents for clients. The “dealer” role encompasses those times when firms act on their own behalf as principals in transactions.

Broker-dealers include firms that serve institutions and those that serve retail trading needs as e*Trade, TD Ameritrade and Charles Schwab.

Some of the functions fulfilled by a broker-dealer include guidance in trading via investment advice and publishing investment research. Broker-dealers are also responsible for keeping track of all accounts. This encompasses knowing how much money is in the client accounts and overseeing all transactions to ensure that clients are not engaging in any illegal activity.

Brokers-dealers must register with the SEC in order to legally buy and sell securities for clients’ accounts. In addition, broker-dealers must join a self-regulatory organization (SRO) that oversees the actions of the broker-dealer.

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