As a broke-dealer, you can either choose to work as an independent business or under a larger financial firm. Regardless of which route you choose, you will need to follow several steps before you can be a broker-dealer. These steps are put in place to ensure that you run your business in a proper manner. Read on to find out more.
Licensing and Testing
Like many other fields, if you want to be a broker-dealer, you will have to sit for some broker dealer exams before you can register. There are several regulatory exams available. These include FINRA’s Securities Industry Essential exams and the Series 7 broker dealer exams.
These exams last for hours, and they cover a wide range of subjects, including securities trading, regulation, and other topics. The purpose of broker dealer exams is to ensure that all registered professionals have the basic understanding needed before they start practicing and handling clients. They also help you to have a better chance at running a successful business. Statistics indicate that about 64% of small businesses are struggling financially, and you do not want to be part of that statistic, which is why it’s beneficial for you to take the exams.
Setting up a Firm
If you are not looking to run a sole proprietorship, you must register a broker-dealer firm. This will grant you unlimited liability. Setting up a firm involves the following steps:
- Obtain the required business licenses from your local and state regulatory bodies.
- Open business accounts for the company and fund them with the starting capital.
- Draft and sign an operating agreement.
- Organize an anti-money laundering system.
- Setup some contracts with clearing agents.
- File the necessary forms with FINRA.
Before you start operating, you must make sure that you meet the statutory capital requirements for broker-dealers. These requirements vary depending on the type of firm you set up.
Submit to Regulatory Bodies
For you to operate legally, you are required to register with several regulatory bodies. These include the following:
- Self-regulatory organizations (SROs) – The purpose of self-regulatory organizations is to police and put in place rules within the broker-dealer industry.
- Securities and Exchange Commission (SEC)
- FINRA’s Central Registration Depository (CRD)
- Securities Investor Protection Corporation (SIPC)
- FINRA’s Investment Advisor Registration Depository (IARD)
Depending on your location, there are several registration requirements you will need to meet. These include but are not limited to fees and other licenses needed before you can start operations.