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How Do I Become a Broker/Dealer?

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  • Written By: Patrick Lynch
  • Edited By: Susan Barwick
  • Last Modified Date: 17 November 2016
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In order to become a broker/dealer, you must meet the standards of your nation’s equivalent of the Securities and Exchange Commission (SEC) in the US. Money is earned on commission when your clients’ investments increase in value, and brokerage organizations also charge a set fee. A broker/dealer must gain different qualifications in order to sell different kinds of securities, which involves the passing of numerous exams. Other aspects of becoming a broker/dealer include joining an organization that regulates the conduct of broker/dealers and another body that offers protection to investors.

A broker/dealer is legally allowed to sell securities and various investment products. This can be done either on behalf of a brokerage or as an independent broker/dealer. In the US, this profession is strictly regulated by the SEC. You must meet these exacting standards in order to be accepted as a licensed broker/dealer.

If you become a broker/dealer, you will earn money on commission when you trade securities for your company's clients. One advantage of being an independent broker/dealer is that you avoid commission structures and broker fees. Regardless of whether you are working for an organization or as an individual, it is vital that you be registered with the requisite regulatory agency.

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To become a broker/dealer, you must obtain the licenses and qualifications that pertain to the investment products you are selling. The requirements depend on the products you are selling. In the US, for example, you will need to pass the Series 6 exam in order to sell annuities and mutual funds. To sell securities directly however, you will also have to pass the Series 7 exam.

You should also join your nation's financial regulatory organization which is the industry's watchdog. In the United States for example, the Financial Industry Regulatory Authority (FINRA) is responsible for enforcing rules and regulations as well as paying special attention to ethical broker/dealer practices. These organizations are usually non-governmental in nature but have authority in the brokerage industry. This means that you must adhere to certain codes of conduct if you wish to become a broker/dealer.

Another requirement if you want to become a broker/dealer is to join some form of investor's security corporation. This is an organization that repays investors who have lost money on securities because the company they invested in went bankrupt. It is akin to purchasing an insurance policy for your clients and will be well received. In certain countries, like the United States for example, such an action is mandatory.

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