Stock Broker License

A stock broker or stockbroker is a regulated professional broker who buys and sells shares and other securities through market makers or Agency Only Firms on behalf of investors.

Requirements

United States

While the term stockbroker is still in use, it is more commonly referred to as simply "broker", "registered rep" or simply "rep"-- shortened versions of the official FINRA (pronounced "FIN-ra") designation "Registered Representative". This designation is obtained by an individual passing the FINRA General Securities Representative Examination (also known as the "Series 7 exam") and being employed ("associated with") a registered Broker-dealer also called a brokerage firm; the firm is typically a FINRA "member" firm.

More restrictive FINRA licenses or series exams exist for brokers or reps who do not need the full array of capabilities with the Series 7. See the FINRA List of Securities Examinations. And variable products such as a variable annuity contract or variable universal life insurance policy typically require the broker to also have one or another state insurance department licenses.

United Kingdom

In the UK, brokers are required to pass the XII (Securities and Investment Institute) Certificate in Securities, this qualification is achieved by passing two exams: Either Unit 1: FBI Financial regulations or Unit 10 Principles of Financial Regulation for MiFID compliant retail trading, and either Unit 2: Securities, Unit 3: Derivatives or Unit 4: for both Securities and Derivatives. Passing Unit 10 or Unit 52 identifies individuals as having attained FSA Approved Person Status.

Hong Kong

To become a representative one has to work for a licensed firm and pass 3 exams to prove ones competency. Passing a fourth exam results in obtaining a 'specialist' license. All tests can be taken with the HKSI. However, passing all tests doesn't result in automatically obtaining the license. It still needs to be approved by the financial regulatory body.

Services provided

A transaction on a stock exchange must be made between two members of the exchange — an ordinary person may not walk into the New York Stock Exchange (for example), and ask to trade stock. Such an exchange must be done through a broker.

There are three types of stockbroking service.

• Execution-only, which means that the broker will only carry out the client's instructions to buy or sell.
• Advisory dealing, where the broker advises the client on which shares to buy and sell, but leaves the final decision to the investor.
• Discretionary dealing, where the stockbroker ascertains the client's investment objectives and then makes all dealing decisions on the client's behalf.

Similar roles

Roles similar to that of a stockbroker include investment advisor, and financial advisor. A stockbroker may or may not be also an investment advisor, and vice versa.

Acting as a principal

Stockbrokers also sometimes or exclusively trade on their own behalf, as a principal, speculating that a share or other financial instrument will increase or decline in price. In such cases the term broker makes little sense and the individuals or firms trading in principal capacity sometimes call themselves dealers, stock traders or simply traders. There are of many other types of traders within capital markets, for example trading within the Foreign exchange market.

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