How to Start a Broker Dealer? Procedure and Demands
Broker-dealers are divided into two main categories e.g. wirehouse and independent broker-dealer. Wirehouse sells its own products while independent broker-dealers sell other`s products. Are you interested in knowing How to Start a Broker Dealer? If yes, continue reading this blog. After reading this blog you will be able to understand the whole process of becoming a broker dealer. So, let’s discuss its steps one by one.
Some Important Factors to Consider Before You Start a Broker Dealer
There are some certain conditions and requirements to start a broker dealer. When you fulfill all these requirements and conditions you can become a successful broker dealer.
- First of all, make sure that you have sufficient capital to fulfill the needs of starting a broker dealer.
- Make sure whether you want to create a new firm or go with already existing
- Make sure you have enough knowledge about registration requirements
- Check the requirements according to your geographical location to avoid any inconveniences later
Time Duration to Start a Broker Dealer
This is an important point to know. It can takes 180 dyas for whole process of your application to be a broker dealer. FINRA can ask you for further documentation as well to verify the whole process. So, be patient and wait until your entire process is done.
How to Start a Broker Dealer? Basic Requirments
There are some specific requirements to start a broker dealer in the United States of America. If you comply with then you can go for further process.
Exchange Act Registration
It is mandatory to register with the SEC under the exchange act. You can complete this registration by filing an application through the FINRA central registered depository system. Any broker dealer who is using email or telephone for transactions is supposed to register with the SEC. so, you are also required to register with the SEC when you plan to start a broker dealer.
Self-Regulatory Organization Membership
Apart from registering under Exchange Act, a broker dealer is acquired to join a self regulatory organization membership as well.
State Registration
Remember that every state has its own rules and regulations regarding the broker dealer. So, study about it carefully before you start the registration. Search for your state and check the requirements.
Associated Persons of Broker Dealers
It is mandatory for a broker dealer to make sure the registration of some individuals working under him. For example, a broker dealer is needed to register the individual as representatives with FINRA under state securities laws.
Requirements OF CAPITAL
As I have mentioned earlier, you are required to meet the financial requirements before you start a broker dealer. This criteria is set by FINRA and SEC so, make sure you are fulfilling these requirements.
Written Procedures
To ensure that all the activities comply with regulatory standards, a broker dealer is supposed to make a written supervisory procedure.
Anti Money Laundering Program
It is a crucial step that every broker dealer is supposed to take. A broker dealer must register with an anti money laundering program. It helps them to identify corruption, ideas about suspicious activities and to prevent financial crimes.
Business Continuity Plan
This is one of the most important steps to take as it ensures that critical business operations can be continued even after any disruption.
Employee Trading Policy
This policy is beneficial for both workers and the dealer. It helps them to regulate the trading activities of the employees and help them prevent any conflict in the business. It ensures your business is running smoothly. So, make sure you know it when you learn about how to start a broker dealer.
Beneficiaries
It is mandatory for transparency that every broker dealer gives detailed information about all its owners and beneficiaries. It not only shows transparency but also shows regulatory compliance. So, make sure you give accurate information about it to start a broker dealer.
Main Responsibilities of a Broker Dealer
There are some key responsibilities of a broker dealer that you need to know.
- Its major responsibility is to execute the trades, provision of liquidity and provide the investment.
- Broker dealers also provide advisory services to its owner.
- Another responsibility of a broker dealer is to provide financial recommendations as well.
- They also provide trading platforms to empower investors.
- The key role of a broker dealer is to facilitate the transaction between seller and buyers
Final Thoughts
Summing it up! After reading this blog you can learn how to start a broker dealer. You need to follow the aforementioned steps, requirements and rules, and regulations to be eligible for the role of the broker dealer. So, follow the rules and regulations and start a broker dealer for your own firm or to work for others.
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