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Properly known as a broker dealer form, a BD form is a document that must be filed with the Securities and Exchange Commission in the United States by every brokerage house that wishes to operate within the country. BD forms carry basic information about the brokerage, such as the finances of the firm and a list of the company officers. Here are some facts about the BD form, and why it is an important document.
One of the main purposes of the SEC is to limit the operation of unethical and unscrupulous brokerages within the country. Keeping information on hand about each and every broker in the United States makes it possible to monitor activity and make sure that all transactions that are conducted by a brokerage house are in keeping with the rules and regulations that are part of financial law in the USA. In exchange for filing a BD form, the SEC issues credentials to the broker, allowing the operation to function under the auspices of government approval.
The vast majority of businesses and investors will not do business with a broker who lacks this approval, so to choose to not submit a BD form is not only running the risk of having the business shutting down. Lack of the credentials that are rewarded as a result of complying with the submission of the BD form also means few if any customers.
The brokerage is responsible for updating the information on the BD form on a regular basis. Some firms choose to update their BD form filing when there is a change in the officers associated with the company, or when there is a major shift in the financial holdings of the firm. The SEC requires the review and update of information on a regular basis, so some firms choose to simply make any updates at this time of periodic review.
A broker dealer firm that is awarded credentials after the submission of the BD form operates within the perimeters outlined by the rules and regulations put in place for all financial institutions. Failure to comply with those regulations can result in the suspension and eventual revocation of those credentials. Loss of SEC approval can be devastating for a brokerage firm, with many forms of access to investment opportunities closed and many clients leaving to find another firm that does retain SEC approval. While the BD form may seem like a minor piece of paperwork, proper filing of the form can ensure that there is ample opportunity to grow and expand over the years.
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