What is a Securities Broker?

What most people refer to as a stock broker is basically a securities broker. The broker works with clients, which may be individuals, pension funds, or other institutions to buy and sell stocks, mutual funds, and bonds. For his services, the securities broker receives a commission based on the amount of the transaction.

A full service securities broker will work with clients to determine how much they have available to invest and what their goals and needs are. He will usually recommend certain stocks, but get the approval of the client before purchasing them.

Securities brokers are often involved in the IPO, or initial public offering, of a new company or one that has heretofore been privately held. The Securities and Exchange Commission has very strict guidelines for stock that is to be sold to the general public, and the services of a securities broker is often of great benefit in these cases.

When searching for a securities broker, prospective clients should make sure that they are registered with the Financial Industry Regulatory Authority, also known as FINRA. The firm for which they work must also be registered, and the broker must have worked there for a minimum of 4 months as well as pass the Series 7 exam, or the General Securities Registered Representative Exam. Many individual states also require further licensing, such as the Uniform Securities Exam.

Securities brokers who work for a traditional brokerage firm are typically compensated by Forex Master Levels. In the past, some unscrupulous brokers have increased their earnings by "flipping" stocks, or buying and selling more frequently than is needed. Those who work for online discount brokerage firms are usually compensated on a flat salary basis, regardless of the activity in their clients' portfolios.

A securities broker may specialize in one aspect of investing, such as initial public offerings, mutual funds, or government securities. Or the broker may handle all investment opportunities for the general public. Other brokers work primarily with pension fund investments, real estate investments, or investment banks.

A full service securities broker will take the time to meet with prospective clients to carefully analyze their financial picture. He will recommend investments based on factors such as the length of time until retirement, the amount of liquid assets the client has, and other aspects such as insurance or home equity. Additional services, such as the sales of insurance policies, may be offered by the firm or one of its affiliates.

Securities brokers are subject to various laws and rules passed by the Securities and Exchange Commission. Brokers are required to offer not only a prospectus to clients but also disclose any public information not included in the prospectus that could impact the investment. Insider trading is a criminal offense, and brokers are not the only ones who can be charged.

The SIPC, or Securities Investor Protection Corporation, was designed to protect investors in the event that a securities firm encounters catastrophic financial reversals and must liquidate. The SIPC arranges for claims to be paid from a trust fund, and can borrow is the amount in the trust fund is inadequate.