Stockbroker

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Stockbroker
Stockbroker.jpg
A stock trader with a multi-monitor workstation, including a Bloomberg Terminal
Occupation
NamesStockbroker
Investment advisor
Share broker [1]
Registered representative
Trading representative
Investment broker
Investment adviser
Financial adviser
Wealth manager
Investment professional
Occupation type
Profession
Activity sectors
 Finance

A stockbroker is an individual or company that buys and sells stocks and other investments for a financial market participant in return for a commission, markup, or fee. In most countries they are regulated as a broker or broker-dealer and may need to hold a relevant license and may be a member of a stock exchange. They generally act as a financial advisor and investment manager. In this case they may also be licensed as a financial adviser such as a registered investment adviser (in the United States).

Contents

Examples of professional designations held by individuals in this field, which affects the types of investments they are permitted to sell and the services they provide include chartered financial consultants, certified financial planners or chartered financial analysts (in the United States and UK), chartered financial planners (in the UK).

In the United States, the Financial Industry Regulatory Authority provides an online tool designed to help understand professional designations. [2]

History of stock broking

(...) This enigmatic business [i.e. the inner workings of the stock exchange in Amsterdam, primarily the practice of VOC and WIC stock trading] which is at once the fairest and most deceitful in Europe, the noblest and the most infamous in the world, the finest and the most vulgar on earth. It is a quintessence of academic learning and a paragon of fraudulence; it is a touchstone for the intelligent and a tombstone for the audacious, a treasury of usefulness and a source of disaster, (...) The best and most agreeable aspect of the new business is that one can become rich without risk. Indeed, without endangering your capital, and with out having anything to do with correspondence, advances of money, warehouses, postage, cashiers, suspensions of payment, and other unforeseen incidents, you have the prospect of gaining wealth if, in the case of bad luck in your transactions, you will only change your name. Just as the Hebrews, when they are seriously ill, change their names in order to obtain relief, so a changing of his name is sufficient for the speculator who finds himself in difficulties, to free himself from all impending dangers and tormenting disquietude.

—  Joseph de la Vega, in his book Confusión de confusiones (1688), the earliest book about stock trading [3]

The first recorded buying and selling of shares occurred in Rome in the 2nd century BC. [4] After the fall of the Western Roman Empire, stockbroking did not become a profession until after the Renaissance, when government bonds were traded in Italian city-states such as Genoa and Venice. [5] In 1602, the Amsterdam Stock Exchange (now Euronext Amsterdam) became the first official stock market with trading in shares of the Dutch East India Company, the first company to issue stock. [6] In 1698, the London Stock Exchange opened at the Jonathan's Coffee-House. [7] On May 17, 1792, the New York Stock Exchange opened under a platanus occidentalis (buttonwood tree) in New York City, as 24 stockbrokers signed the Buttonwood Agreement, agreeing to trade five securities under that buttonwood tree. [8]

Licensing and training requirements

Australia

Up until January 1, 2019, investment professionals that offer financial advice in Australia had to pass training pursuant to RG146. [9] They must hold an Australian Financial Services Licence that is overseen by the Australian Securities and Investments Commission. [10] They are subject to fiduciary obligations.

As of 2019, Australia's biggest online stockbroker was Commonwealth Securities, other large brokers were ANZ Share Investing, nabtrade and Westpac Online Investing. [11]

Canada

In Canada, to be licensed as a "registered representative" or an "investment advisor" and thus be qualified to offer investment advice and trade all instruments with the exception of derivatives, an individual employed by an investment firm must have completed the Canadian Securities Course, the Conduct & Practices Handbook, and the 90-day Investment Advisor Training Program. Within 30 months of obtaining designation as a "registered representative", the registrant is further required to meet the post-licensing proficiency requirement to complete the Wealth Management Essentials course. A registered representative is also required to complete 30 hours of professional development (product knowledge) and 12 hours of compliance training every three year continuing education cycle as set out by the Investment Industry Regulatory Organization of Canada. To trade options and/or futures, a registered representative must pass the Derivatives Fundamentals Course in addition to the Options Licensing Course and/or the Futures Licensing Course, or alternatively, the Derivatives Fundamentals Options Licensing Course for options. [12] [13] [14]

Hong Kong

In Hong Kong, to become a representative one has to work for a licensed firm and pass 3 exams to prove competency. Passing a fourth exam results in obtaining a "specialist" license. All tests can be taken with the Hong Kong Securities Institute. [15] After passing all tests, approval must be received by the Securities and Futures Commission.

India

Share brokers in India are governed by the Securities and Exchange Board of India Act, 1992 and brokers must register with the Securities and Exchange Board of India. The National Stock Exchange of India and the Bombay Stock Exchange via brokers, provide an ecosystem to investors to trade in capital markets through various channels- broker offices, investment advisor or screen-based electronic trading system. An individual employed by an investment firm must complete the National Institute of Securities Markets (NISM) exam and apply to SEBI for registration as an Investment Advisor. [16]

Stock market advisory and research services are highly regulated in India. Only SEBI registered stock advisory and investment research analysts are allowed to do so. The complete details of these authorized persons are available on website of SEBI for protection of investors.

Ireland

The recognized benchmark designation for investment professionals in Ireland is the QFA ("qualified financial adviser") designation, which is awarded to those who pass the Professional Diploma in Financial Advice and agree to comply with the ongoing "continuous professional development" (CPD) requirements. The qualification, and attaching CPD program, meets the "minimum competency requirements" specified by the Financial Regulator, for advising on and selling five categories of retail financial products:

As of 2019, Davy and Goodbody were Irish largest stockbrokers. [17]

New Zealand

In New Zealand, the New Zealand Qualifications Authority oversees qualifications. The New Zealand Certificate in Financial Services (Level 5) is the minimum level of qualification necessary to offer investment advice. [18]

Singapore

In Singapore, becoming a trading representative requires passing 4 exams, modules 1A, 5, 6 and 6A, from the Institute of Banking and Finance and applying for the license through MAS[ clarification needed ] and SGX[ clarification needed ].

South Africa

The Johannesburg Securities Exchange rules require that member firms must be under the control of a "qualified stockbroker", who is also an executive director of the firm; and branches, likewise managed. [19] The South African Institute of Stockbrokers (SAIS) [20] offers the six exams required to become such, a Certified Stockbroker, or CSb(SA), following 3 years' work experience, and with other educational requirements met. [21] See also re. "Regulated Positions" and "Registered Persons" at The South African Institute of Financial Markets. (SAIS also offers the Financial Markets Practitioner vocational certification. [22] )

South Korea

In South Korea, the Korea Financial Investment Association oversees the licensing of investment professionals.

United Kingdom

Stockbroking is a regulated profession in the United Kingdom and brokers must achieve a recognised qualification from the Appropriate Qualifications list of the Financial Conduct Authority (FCA). [23]

The Chartered Institute for Securities & Investment (CISI), established in 1992, is the largest UK professional body for investment professionals. [24] It evolved from the London Stock Exchange, has around 45,000 members in over 100 countries and delivers more than 40,000 exams each year. [25] Qualifications include: the CISI Level 4 Diploma in Investment Advice and the CISI Level 7 Diploma in Wealth Management

CFA UK [26] also offers various FCA Appropriate Qualifications. [27] It represents the interests of around 12,000 investment professionals and is part of the worldwide network of members of the CFA Institute. [28]

United States

The Financial Industry Regulatory Authority, a self-regulatory organization, regulates investment professionals in the United States. Exams that individuals may take for accreditation include the Series 7 exam, the Uniform Securities Agent State Law Exam (Series 63), the Uniform Combined State Law Exam (Series 66), and the Uniform Investment Adviser Law Exam (Series 65). [29]

Individuals holding some of those licenses, such as the Series 6 exam, cannot be called stockbrokers since they are prohibited from selling stocks.[ citation needed ] Selling variable products, such as a variable annuity contract or variable universal life insurance policy, typically requires the broker to also have one or another state insurance department licenses.

Individuals and firms are regulated by the U.S. Securities and Exchange Commission and laws related to the Investment Advisers Act of 1940, including laws related to fiduciary.

See also

Related Research Articles

<span class="mw-page-title-main">Stock exchange</span> Organization that provides services for stock brokers and traders to trade securities

A stock exchange, securities exchange, or bourse is an exchange where stockbrokers and traders can buy and sell securities, such as shares of stock, bonds and other financial instruments. Stock exchanges may also provide facilities for the issue and redemption of such securities and instruments and capital events including the payment of income and dividends. Securities traded on a stock exchange include stock issued by listed companies, unit trusts, derivatives, pooled investment products and bonds. Stock exchanges often function as "continuous auction" markets with buyers and sellers consummating transactions via open outcry at a central location such as the floor of the exchange or by using an electronic trading platform.

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.

<span class="mw-page-title-main">Securities and Exchange Board of India</span> Regulatory body for securities in India

The Securities and Exchange Board of India (SEBI) is the regulatory body for securities and commodity market in India under the administrative domain of Ministry of Finance within the Government of India. It was established on 12 April 1988 as an executive body and was given statutory powers on 30 January 1992 through the SEBI Act, 1992.

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. Passing unanimously in both the House and Senate, 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 postgraduate professional certification offered internationally by the US-based CFA Institute to investment and financial professionals. The program teaches a wide range of subjects relating to advanced investment analysis—including security analysis, statistics, probability theory, fixed income, derivatives, economics, financial analysis, corporate finance, alternative investments, portfolio management—and provides a generalist knowledge of other areas of finance.

<span class="mw-page-title-main">Financial planner</span> Professional who prepares financial plans for people

A financial planner or personal financial planner is a qualified financial advisor. Practicing in full service personal finance, they advise clients on investments, insurance, tax, retirement and estate planning.

The Certified Financial Planner certification 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 owner of the CFP mark outside of the United States. The certification is generally considered the gold standard in the financial planning industry. The certification is managed by the Certified Financial Planner Board of Standards, Inc., which was founded in 1985 as a 501(c)(3) non-profit organization; it is neither a government designation nor an accredited degree.

<span class="mw-page-title-main">Financial adviser</span> Professional who renders financial services to clients

A financial adviser or financial advisor is a professional who provides financial services to clients based on their financial situation. In many countries, financial advisors must complete specific training and be registered with a regulatory body in order to provide advice.

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 (SEC) 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 adviser. 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).

<span class="mw-page-title-main">Securities research</span> Discipline within the financial services industry

Securities research is a discipline within the financial services industry. Securities research professionals are known most generally as "analysts", "research analysts", or "securities analysts"; all the foregoing terms are synonymous. Research analysts produce research reports and typically issue a recommendation: buy ("overweight"), hold, or sell ("underweight"); see target price and trade idea.

Following is a partial list of professional certifications in financial services, with an overview of the educational and continuing requirements for each; see Professional certification § Accountancy, auditing and finance and Category:Professional certification in finance for all articles. As the field of finance has increased in complexity in recent years, the number of available designations has grown, and, correspondingly, some will have more recognition than others. Note that in the US, many state securities and insurance regulators do not allow financial professionals to use a designation — in particular a "senior" designation — unless it has been accredited by either the American National Standards Institute or the National Commission for Certifying Agencies.

The Chartered Financial Planner is a qualification for professional financial planners and financial advisers awarded by the Chartered Insurance Institute.

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

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.

<span class="mw-page-title-main">Chartered Institute for Securities & Investment</span> UK professional association for the financial planning industry

The Chartered Institute for Securities & Investment (CISI) is a global professional body for those in the financial and investment profession. It offers a range of qualifications and resources for professional development, as well as setting standards of conduct and ethics for those in the industry.

<span class="mw-page-title-main">Cyprus Securities and Exchange Commission</span> Financial regulator of Cyprus

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.

<span class="mw-page-title-main">GXG Markets</span>

GXG Markets was a European Regulated Market which operated a securities market focusing on SME companies by operating a three-tier market structure with an OTC (Over-the-counter) segment called GXG First Quote, a multilateral trading facility (MTF) called GXG Main Quote and a Regulated market called GXG Official List.

<span class="mw-page-title-main">Securities market participants (United States)</span>

Securities market participants in the United States include corporations and governments issuing securities, persons and corporations buying and selling a security, the broker-dealers and exchanges which facilitate such trading, banks which safe keep assets, and regulators who monitor the markets' activities. Investors buy and sell through broker-dealers and have their assets retained by either their executing broker-dealer, a custodian bank or a prime broker. These transactions take place in the environment of equity and equity options exchanges, regulated by the U.S. Securities and Exchange Commission (SEC), or derivative exchanges, regulated by the Commodity Futures Trading Commission (CFTC). For transactions involving stocks and bonds, transfer agents assure that the ownership in each transaction is properly assigned to and held on behalf of each investor.

Financial regulation in India is governed by a number of regulatory bodies. Financial regulation is a form of regulation or supervision, which subjects financial institutions to certain requirements, restrictions and guidelines, aiming to maintain the stability and integrity of the financial system. This may be handled by either a government or non-government organization. Financial regulation has also influenced the structure of banking sectors by increasing the variety of financial products available. Financial regulation forms one of three legal categories which constitutes the content of financial law, the other two being market practices and case law.

References

  1. ↑ "Compare brokers: what is the best broker?" . Retrieved April 17, 2016.
  2. ↑ komsan, seksun. "Understanding Professional Designations". seksun_komsan.org.co.th. Financial Industry Regulatory Authority . Retrieved October 9, 2020.
  3. ↑ De la Vega, Joseph: Confusión de confusiones (1688): Portions Descriptive of the Amsterdam Stock Exchange. Selected and translated by Hermann Kellenbenz. (Cambridge, MA: Baker Library, Harvard Graduate School of Business Administration, 1957)
  4. ↑ Goetzmann, William N. (2017). Money Changes Everything: How Finance Made Civilization Possible. Princeton University Press. p. 17. ISBN   9780691178370.
  5. ↑ Piola Caselli, Fausto (2015). Government Debts and Financial Markets in Europe. Routledge. p. 24. ISBN   9781317314233.
  6. ↑ Beattie, Andrew (December 13, 2017). "What Was the First Company to Issue Stock?". Investopedia. Retrieved October 9, 2020.
  7. ↑ Rolland, Gail (2010). Market Players: A Guide to the Institutions in Today's Financial Markets. John Wiley & Sons. p. 277. ISBN   9780470665558.
  8. ↑ "Wall Street and the Stock Exchanges: Historical Resources". Library of Congress. June 12, 2018. Retrieved October 9, 2020.
  9. ↑ Goh, Jassmyn (June 10, 2020). "RG146 CPD no longer required". moneymanagement.com.au. Retrieved October 9, 2020.
  10. ↑ "Financial advice". Australian Securities and Investments Commission . Retrieved October 9, 2020.
  11. ↑ Yeates, Clancy (September 30, 2019). "CommSec profits fall 20.8 per cent amid market turbulence". The Sydney Morning Herald . Retrieved October 9, 2020.
  12. ↑ "CSI Career Map - CSI Global Education". Canadian Securities Institute.
  13. ↑ "Continuing Education/Approval Category Chart" (PDF). Investment Industry Regulatory Organization of Canada.
  14. ↑ "Continuing Education & Member Resources". Investment Industry Regulatory Organization of Canada.
  15. ↑ Yiu, Enoch (December 1, 2012). "Hong Kong puts financial professionals to the test". South China Morning Post . Retrieved October 9, 2020.
  16. ↑ "SEBI prescribes norms for investment advisors". Business Line. September 24, 2020. Retrieved October 9, 2020.
  17. ↑ Hamilton, Peter (October 15, 2019). "So you want to invest in the stock market: what will it cost?". The Irish Times . Retrieved October 9, 2020.
  18. ↑ "For Individuals Seeking to Complete the Level 5 qualification". Skills Organisation.
  19. ↑ "SAIS Gazette Report" (PDF).
  20. ↑ South African Institute of Stockbrokers, sais.co.za
  21. ↑ Becoming a Stockbroker, sais.co.za
  22. ↑ Financial Markets Practitioner, sais.co.za
  23. ↑ Williams, Alex (September 17, 2020). "Best Online Trading Platform (UK) in 2020". hostingdata.co.uk. Retrieved October 9, 2020.
  24. ↑ Mitra, Gautam; Mitra, Leela (2011). The Handbook of News Analytics in Finance. John Wiley & Sons. ISBN   9781119990802.
  25. ↑ Oates, Simon (February 1, 2022). "About The CISI". financial-expert.co.uk. Retrieved February 2, 2022.
  26. ↑ "CFA UK | Building a better investment profession". www.cfauk.org.
  27. ↑ Qualifications, cfauk.org
  28. ↑ Tew, Imogen (October 9, 2020). "Investment sector fears major restructure and staff cuts". Financial Times Adviser. Retrieved October 9, 2020.
  29. ↑ Fiorillo, Steve (August 22, 2019). "How to Become a Financial Advisor: What You Need to Know". TheStreet.com . Retrieved October 9, 2020.
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