Who is considered a broker-dealer?
Asked by: Tristin Kirlin | Last update: February 20, 2026Score: 4.7/5 (71 votes)
A broker-dealer is a firm or individual that buys and sells securities (like stocks, bonds) for clients (acting as a broker) or for their own account (acting as a dealer), essentially bridging investors and markets by facilitating trades, providing advice, and ensuring liquidity. They are heavily regulated by bodies like the SEC and FINRA, playing a crucial role in capital formation and market operations, ranging from small boutiques to large banks like Morgan Stanley or Charles Schwab.
What is considered a broker-dealer?
Broker-dealer (“BD”) is defined in Corporations Code (“Code”) Section 25004 and means any person engaged in the business of effecting transactions in securities in this state for the account of others or for his own account.
What makes a company a broker-dealer?
A broker-dealer is a firm or individual licensed to sell individual securities. Typically, a broker-dealer also files a notice of which securities it will sell. An investment adviser cannot sell securities but acts more like a consultant, giving advice on what securities a person should invest in.
What are examples of broker-dealers?
Some of the most well-known broker-dealers are Charles Schwab, Morgan Stanley's E-Trade, and Fidelity. Some of these, like Schwab, are full-scale financial services firms, while E-Trade is primarily an online brokerage firm.
Who is not a broker-dealer?
The Uniform Securities Act (USA) explicitly names three persons that are consistently excluded from the definition of a broker-dealer: Agents. Issuers. Banks, savings institutions, and trust companies.
What is a Broker-Dealer?? (Series 63, 65, 66)
What is the 7 rule in trading?
The 7% rule in stock trading is a risk management guideline that suggests selling a stock if its price drops about 7% to 8% below your purchase price, helping to cut losses quickly and prevent larger drawdowns, popularized by William O'Neil, who found quality stocks rarely fall more than this without fundamental issues, acting as an automatic stop-loss to protect capital and enforce discipline.
Is Schwab considered a broker-dealer?
Our Best Interest Disclosure gives more detailed information about how we work in your best interest when we make account and investment recommendations as a broker-dealer, while our Limitations and Conflicts of Interest document provides more information about the limitations or conflicts that apply when we make these ...
Who are the big 4 brokers?
The "Big 4" depends on the industry, but commonly refers to Marsh McLennan, Aon, Arthur J. Gallagher, and Willis Towers Watson (WTW) in global insurance brokerage, or Charles Schwab, Vanguard, Fidelity, and J.P. Morgan for U.S. retail stock brokerage, while the accounting "Big Four" are Deloitte, PwC, EY, and KPMG.
What is another name for a broker-dealer?
Security brokers can also be called broker-dealers, financial services sales agents, securities agents, registered representatives, account executives, investment executives, advisors, or representatives.
Is Fidelity a broker-dealer?
Fidelity Brokerage Services LLC (“FBS”) is a registered broker-dealer with the U.S. Securities and Exchange Commission. Brokerage and investment advisory services and fees differ, and it is important for you to understand these differences.
Is it safe to keep more than $500,000 in a brokerage account?
It's generally safe to keep over $500,000 in a brokerage account because the Securities Investor Protection Corporation (SIPC) protects up to $500,000 in securities and cash if the firm fails, but for amounts exceeding that, you'd want to spread funds across multiple SIPC-member firms or into different account types (like FDIC-insured bank accounts) to stay fully protected, as SIPC only covers up to $500,000 per customer per firm, with a $250,000 cash limit. While direct firm failure is rare and assets usually transfer smoothly, exceeding SIPC limits leaves you uninsured for the excess if a firm does go under and can't return assets, so diversification is key for large sums.
What are the two types of brokers?
There are two main types of brokers: discount brokers, who focus on executing trades with minimal fees, and full-service brokers, who offer tailored investment advice and a broader range of services in exchange for higher commissions.
What are the 4 types of securities?
The four main types of securities are Equity (ownership like stocks), Debt (loans like bonds), Hybrid (mix of equity/debt like convertible bonds), and Derivative (based on underlying assets like options). These categories represent ownership, borrowing, a blend, and contracts on other assets, allowing investors to gain exposure to different financial markets.
Can an issuer be a broker-dealer?
The Issuer Exemption: Issuers are generally not “brokers” because they sell securities for their own accounts and not for the account of others. Issuers generally are not “dealers” because they do not buy and sell securities for their own accounts as a part of a regular business.
Is JPMorgan Chase a broker-dealer?
As a broker-dealer, our services are not limited to taking customer orders and executing securities transactions. In this capacity, we offer a variety of services relating to investments in securities, including investment research, trade execution and custody services.
What are the examples of broker-dealers?
The "big five" are Nomura Securities, Daiwa Securities, SMBC Nikko Securities, Mizuho Securities, and Mitsubishi UFJ Securities.
Is $500,000 enough to work with a financial advisor?
Yes, $500,000 is generally enough to work with a financial advisor, often meeting minimums for comprehensive services, especially if it's in liquid, investable assets; many advisors specialize in this asset level, providing help with retirement, tax, and estate planning, though you'll pay fees, typically around 0.5% to 1% of assets annually, making it crucial to compare costs versus benefits, say SmartAsset and Excelsior Financial Advisors, say experts from ARQ Wealth Advisors and Bankrate.
What constitutes a broker-dealer?
By definition, broker-dealers are buyers and sellers of securities, and they are also distributors of other investment products. As the name implies, they perform a dual role in carrying out their responsibilities. As dealers, they act on behalf of the brokerage firm, initiating transactions for the firm's own account.
What brokerage do most millionaires use?
Millionaires use a mix of traditional brokers for self-directed investing like Fidelity, Charles Schwab, and Interactive Brokers, often leveraging their high-net-worth services, alongside specialized prime brokerages (e.g., Goldman Sachs, Morgan Stanley) for complex needs like short selling, lending, and risk management, plus accessing private funds (hedge funds/private equity). The best choice depends on their specific needs, from sophisticated trading to holistic wealth management.
What are the risks of using a broker?
7 RISKS OF USING A BUSINESS BROKER (PLUS 1 BONUS RISK)
- Cost. Engaging a business broker comes at a cost. ...
- Lack of Control. ...
- Conflicts of Interest. ...
- Compatibility and Understanding. ...
- Lack of Alignment and Understanding. ...
- Confidentiality Concerns. ...
- Dependency on Broker Performance. ...
- BONUS RISK: Poorly Written Broker Contract.
Who is the best broker in the USA?
Best brokers for trading stocks online: Top picks for 2026
- Charles Schwab. Rating: 5 stars out of 5. ...
- Fidelity Investments. Rating: 5 stars out of 5. ...
- Robinhood. Rating: 4 stars out of 5. ...
- E-Trade. Rating: 4.5 stars out of 5. ...
- Interactive Brokers. Rating: 5 stars out of 5. ...
- Merrill Edge. ...
- Ally Invest. ...
- Tastytrade.
Is Charles Schwab in danger of going under?
While some older analyses suggested a slight distress risk, Charles Schwab's itself is considered highly unlikely due to its strong balance sheet, diversified business, and robust client asset protection (including FDIC insurance on cash), making it a very safe place for investments despite past concerns about interest rate risks.
Is Vanguard considered a broker-dealer?
It is the largest provider of mutual funds and the second-largest provider of exchange-traded funds (ETFs) in the world after BlackRock's iShares. In addition to mutual funds and ETFs, Vanguard offers brokerage services, educational account services, financial planning, asset management, and trust services.
Which brokerage firm is better, Schwab or Fidelity?
Fidelity is the winner here due to better cash interest rates, its no-fee mutual fund offering, and slightly lower management fees and expenses across various services and investments. But if we were comparing Schwab to nearly any other brokerage firm aside from Fidelity, it would be the winner.