Broker-Dealer

The FINRA broker-dealer license is required for firms and individuals engaged in the buying and selling of securities, ensuring compliance with regulatory standards. It involves passing qualifying exams and adhering to strict guidelines to protect investors and maintain market integrity.

Overview

Transaction Limitations

  • Firms regulated by FINRA must adhere to strict trading rules that prevent market manipulation, insider trading, and other unethical practices. Transactions must be transparent and meet reporting obligations.

Safeguarding Requirements

  • Client funds under a Broker Dealer licence are safeguarded by strict FINRA rules. Firms are required to segregate client funds from their operational funds, ensuring that customer assets are protected from financial difficulties within the firm. Additionally, these funds are protected by SIPC insurance.

Jurisdictional Limitations

  • The Broker Dealer licence under FINRA applies within the United States. Firms looking to expand internationally must seek additional regulatory approvals. FINRA ensures that Broker Dealers comply with US securities laws and cannot offer services outside their jurisdiction without meeting local regulations.

Legal & Regulatory Framework

  • FINRA Rules

  • SEC Rules and Regulations

  • Securities Act of 1933

  • Securities Exchange Act 1934

  • Trust Indenture Act of 1939

  • Investment Company Act of 1940

  • Investment Advisers Act of 1940

  • Sarbanes-Oxley Act of 2002

  • Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010

  • Jumpstart Our Business Startups Act of 2012

Key Restrictions

  • Broker Dealer firms are restricted from engaging in insider trading, fraudulent activities, or conflicts of interest. Firms must adhere to strict limits on proprietary trading, ensuring that client interests are prioritized over the firm‚ own profit motives.

Regulatory Updates

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Deep dive into Broker-Dealer

Additional Information (Legal & Regulatory Framework)

  • FINRA Rules: Governs the behavior of brokerage firms and professionals, ensuring they comply with securities laws and protect investors.

  • SEC Rules and Regulations: Enforces federal securities laws through its partnership with FINRA, ensuring firms comply with national standards.

  • Securities Act of 1933: Governs the issuance of new securities and ensures that FINRA members provide full and fair disclosure to protect investors from fraud.

  • Securities Exchange Act 1934: Establishes the framework for regulating securities exchanges, broker-dealers, and FINRA as a self-regulatory organization (SRO), ensuring that FINRA enforces rules to prevent market manipulation and fraud.

  • Trust Indenture Act of 1939: Ensures that bond issuances by FINRA-regulated firms meet specific standards to protect bondholders.

  • Investment Company Act of 1940: Regulates mutual funds and investment companies to ensure that FINRA members managing these funds comply with ethical and legal standards.

  • Investment Advisers Act of 1940: Regulates investment advisers and requires FINRA members offering advisory services to act in the best interest of their clients.

  • Sarbanes-Oxley Act of 2002: Strengthens corporate governance and accountability for publicly traded companies, which FINRA members must adhere to when offering investment services.

  • Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010: Implements stricter financial regulations following the 2008 crisis, impacting how FINRA members manage risk and compliance.

  • Jumpstart Our Business Startups (JOBS) Act of 2012: Eases securities regulations for smaller businesses, and FINRA enforces compliance to ensure transparency and investor protection when these firms raise capital.