Stockbroker

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A Bloomberg Terminal stockbroker

A stockbroker is a regulated professional individual, usually associated with a brokerage firm or broker-dealer, who buys and sells stocks and other securities for both retail and institutional clients, through a stock exchange or over the counter, in return for a fee or commission. Stockbrokers are known by numerous professional designations, depending on the license they hold, the type of securities they sell, or the services they provide. In the United States, a stockbroker must pass both the Series 7 and Series 63 exams in order to be licensed. In most English speaking venues, the two word term stock broker, like stock brokerage, normally applies to the brokerage firm, rather than to the individual.

Other designations[edit]

Professional titles similar to that of stockbroker include investment advisor, and financial advisor. A "financial advisor" may or may not be a stockbroker, since some Series 6 licensed individuals (who are prohibited from selling stock) go by that title. An "investment advisor", registered investment advisor, or investment advisor representative has training and capabilities similar to that of a stockbroker, but different licensing and different regulatory oversight. Many individuals hold both licenses, and might typically manage commission-based accounts as a stockbroker and fee-based accounts as an RIA investment advisor, or "IAR" investment advisor representative.

The Financial Industry Regulatory Authority (FINRA) provides an online tool designed to help understand professional designations.[1]

Requirements[edit]

Canada[edit]

In Canada, a stockbroker is called a "Registered Representative" or an "Investment Advisor". To be licensed as a Registered Representative and thus qualified to offer investment advice and trade all instruments with the exception of derivatives, an individual employed by an IIROC member firm must have completed the Canadian Securities Course (CSC), the Conduct & Practices Handbook (CPH),and the 90 day Investment Advisor Training Program (IATP). Within 30 months of becoming licensed, the registrant is further required to meet the post-licensing proficiency requirement by passing the Wealth Management Essentials course (WME). A Registered Representative is also required to complete 30 hours of professional development (product knowledge) and 12 hours of compliance training every three year continuing education cycle as set out by the Investment Industry Regulatory Organization of Canada (IIROC). To trade options and/or futures, a Registered Representative must pass the Derivatives Fundamentals Course (DFC) in addition to the Options Licencing Course (OLC) and/or the Futures Licensing Course (FLC), or alternatively, the Derivatives Fundamentals Options Licensing Course (DFOL) for options.[2][3][4]

Hong Kong[edit]

To become a representative one has to work for a licensed firm and pass 3 exams to prove one's 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.

Singapore[edit]

In Singapore to become a trading representative, you need to pass 4 exams from the Institute of Banking and Finance. The 4 exams are Modules 1A, 5, 6 and 6A. After you pass the exams, you need to apply for the license through MAS and SGX.

United Kingdom[edit]

In the UK, brokers are required to pass the XII Chartered Institute for Securities & Investment[5] Certificate in Securities, this qualification is achieved by passing two exams: Unit 1: FBI Financial regulations or Unit 10 Principles of Financial Regulation for MiFID compliant retail trading, and
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 FCA Approved Person Status.

United States[edit]

While the term "stockbroker" is still in use, more common terms are "broker", "financial advisor", "registered rep." or simply "rep." — the latter being abbreviations of the official Financial Industry Regulatory Authority[6] (FINRA) designation "Registered Representative," obtained by passing the FINRA General Securities Representative Exam (also known as the "Series 7 exam") and being employed ("associated with") a registered broker-dealer, also called a brokerage firm or (in the case of some larger money center broker/dealers) a "wirehouse", typically a FINRA member firm.[7] Other FINRA licenses or series exams exist. Although individuals holding some of those licenses, such as the "Series 6", cannot be called stockbrokers since they are prohibited from selling stock and are not trained or licensed in the full array of capabilities of a Series 7 stockbroker (see list of securities examinations). Selling 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.

See also[edit]

References[edit]