Investment broker

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Investment brokers are individuals who bring together buyers and sellers of investments. [1] They usually are required to be licensed to act on behalf of buyers and sellers of stock. They charge a commission on trades that they execute on such instructions from buyers and sellers.

To invest is to allocate money in the expectation of some benefit in the future.

Stock financial instrument

The stock of a corporation is all of the shares into which ownership of the corporation is divided. In American English, the shares are commonly known as "stocks." A single share of the stock represents fractional ownership of the corporation in proportion to the total number of shares. This typically entitles the stockholder to that fraction of the company's earnings, proceeds from liquidation of assets, or voting power, often dividing these up in proportion to the amount of money each stockholder has invested. Not all stock is necessarily equal, as certain classes of stock may be issued for example without voting rights, with enhanced voting rights, or with a certain priority to receive profits or liquidation proceeds before or after other classes of shareholders.

Commissions are a form of variable-pay remuneration for services rendered or products sold. Commissions are a common way to motivate and reward salespeople. Commissions can also be designed to encourage specific sales behaviors. For example, commissions may be reduced when granting large discounts. Or commissions may be increased when selling certain products the organization wants to promote. Commissions are usually implemented within the framework on a sales incentive program, which can include one or multiple commission plans.

Contents

Types of investment brokers

Prime brokerage is the generic name for a bundled package of services offered by investment banks, wealth management firms, and securities dealers to hedge funds which need the ability to borrow securities and cash in order to be able to invest on a netted basis and achieve an absolute return. The prime broker provides a centralized securities clearing facility for the hedge fund so the hedge fund's collateral requirements are netted across all deals handled by the prime broker. These two features are advantageous to their clients.

Main points in activity

Main functions

Types of orders

Related Research Articles

In financial services, a broker-dealer is a natural person, company or other organization that engages in the business of trading securities for its own account or on behalf of its customers. Broker-dealers are at the heart of the securities and derivatives trading process.

Canadian Securities Institute

The Canadian Securities Institute is a Canadian organization that offers licensing courses, advanced certifications, continuing education and custom training for financial services professionals in Canada and internationally.

The Investment Advisers Act of 1940, codified at 15 U.S.C. § 80b-1 through 15 U.S.C. § 80b-21, is a United States federal law that was created to monitor and regulate the activities of investment advisers as defined by the law. It is the primary source of regulation of investment advisers and is administered by the U.S. Securities and Exchange Commission.

The Chartered Financial Analyst (CFA) Program is a professional credential offered internationally by the American-based CFA Institute to investment and financial professionals. The program covers a broad range of topics relating to investment management, financial analysis, quantitative analysis, equities, fixed income and derivatives, and provides a generalist knowledge of other areas of finance.

The Certified Financial Planner (CFP) designation is a professional certification mark for financial planners conferred by the Certified Financial Planner Board of Standards in the United States, and by 25 other organizations affiliated with Financial Planning Standards Board (FPSB), the international owner of the CFP mark outside of the United States.

A financial adviser or financial advisor, is a professional who suggests and renders financial services to clients based on their financial situation. In many countries financial advisors have to complete specific training and hold a license to provide advice. In the United States for example a financial adviser carries a Series 65 or 66 license and according to the U.S. Financial Industry Regulatory Authority (FINRA), license designations and compliance issues must be reported for public view. FINRA describes the main groups of investment professionals who may use the term financial advisor to be: brokers, investment advisers, accountants, lawyers, insurance agents and financial planners.

Uniform Investment Adviser Law Examination, also called the Series 65 exam, is a test taken by individuals in the United States who seek to become licensed investment adviser representatives. The exam covers topics necessary to provide investment advice to clients.

The Series 7 exam, also known as the General Securities Representative Exam (GSRE), is a test for registered representatives. The Financial Industry Regulatory Authority (FINRA) administers the exam. In the United States, stockbrokers take this test to get a license to trade.

In the United States, the investment company products/variable life contracts representative exam, is commonly referred to as the Series 6 exam. Individuals passing this multiple choice exam are licensed to sell a limited set of securities products:

A Registered Investment Adviser (RIA) is a firm that is an Investment adviser in the United States, registered as such with the Securities and Exchange Commission or a state's securities agency. The numerous references to RIAs within the Investment Advisers Act of 1940 popularized the term, which is closely associated with the term investment advisor. An investment adviser is defined by the Securities and Exchange Commission as an individual or a firm that is in the business of giving advice about securities. However, an RIA is the actual firm, while the employees of the firm are called Investment Adviser Representatives (IARs).

The CII's title Chartered Financial Planner is a widely accepted 'gold standard' qualification for professional financial planners and financial advisers in the United Kingdom.

In the United States, the Financial Industry Regulatory Authority, Inc. (FINRA) is a private corporation that acts as a self-regulatory organization (SRO). FINRA is the successor to the National Association of Securities Dealers, Inc. (NASD) and the member regulation, enforcement, and arbitration operations of the New York Stock Exchange. It is a non-governmental organization that regulates member brokerage firms and exchange markets. The government agency which acts as the ultimate regulator of the securities industry, including FINRA, is the Securities and Exchange Commission.

A registered representative, also called a general securities representative, a stockbroker, or an account executive, is an individual who is licensed to sell securities and has the legal power of an agent in the United States.

To become a professional securities broker in the United States, an individual must take and pass the General Securities Representative Exam and in most states, the Uniform Securities Agent State Law Examination. To take the test, you must be sponsored by "a member firm, a self-regulatory organization (SRO), or an exchange." This requirement, as well as the administration of the test, is under the jurisdiction of FINRA, the Financial Industry Regulatory Authority.

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Chartered Institute for Securities & Investment

The Chartered Institute for Securities & Investment (CISI) is a global professional body for those who work in the financial and investment industry. It aims to set standards of conduct and ethics for participants in the securities and investments industry, and to provide qualifications for such professionals.

Cyprus Securities and Exchange Commission government agency

The Cyprus Securities and Exchange Commission, better known as CySEC, is the financial regulatory agency of Cyprus. As an EU member state, CySEC's financial regulations and operations comply with the European MiFID financial harmonization law. Notably a significant number of overseas retail forex brokers and binary options brokers have obtained registration from CySEC.

The Chartered Investment Manager (CIM®), previously Canadian Investment Manager, designation is a professional certification conferred by Canadian Securities Institute, a Canadian financial education company that provides courses, programs, certifications and designations for financial industry professionals.

A Financial Planner typically prepares financial plans, comprehensive or modular, for his or her clients. The kinds of services financial planners offer can vary widely. Ideal financial planners coaches, guides and plan every aspect of their clients' financial life holistically — including saving, investments, insurance, taxes, retirement, and estate (inheritance) and help them develop a detailed strategy or financial plan for meeting all your financial goals. Such ideal financial planners are independent, not tied to any bank, insurance or investment companies, and act wholly for the interest of their clients. Their remuneration may come from only fees, only commission or a hybrid of fees and commission. Depending on which country they are practising and the regulations that binds them.

References

  1. All About Investing, Esme Faerber, ISBN   0-07-145752-6