A broker-dealer is a person, organization or company in financial services that are involved in trading securities for its account or a customer. Two options are there to consider when looking into becoming a broker-dealer or wanting to start a broker-dealer. You can either begin to creating your firm from zero or buy an existing one. However, when considering starting a broker-dealer from scratch may be a lengthy process. If one has the time to start a broker-dealer, rather than just buying an existing one would be best. Reasons being that:
HOW TO START A BROKER-DEALER?
To start a broker-dealer from nothing gives you some time to ease your way into the regulatory process. Also, this represents an opportunity to get more acquainted with your local FINRA representatives before you start a broker-dealer officially. The burden in compliance of running a Broker-Dealer is not one to be taken lightly. The few preparation months you get are vital in making sure that you kick off on the right foot.
Moreover, if you can find yourself a good but reasonably priced attorney, you will see that the process to start a broker-dealer would be much cheaper than buying an existing one. Note that the only relevant value of purchasing an established broker-dealer is the fact that you can be ready and running in a matter of days.
The importance of broker-dealers
Broker-dealers have a significant part to play in the financial markets. They are the ones that provide the equipment and structures that make stock trading easier. It is through a brokerage firm that you must open an account first when wanting to buy stock. The brokerage firm is the one that ensures that you have enough funds in your account balance to carry out the trade. It provides the computer systems used to facilitate the trade as well as keep record of that trade. Brokerage firms also take care of the financial transactions between a buyer and seller and facilitate operations of the future as well.
Start a broker-dealer- REGULATIONS
The regulatory review process
for both purchasing and starting up a broker-dealer is pretty much constant (the same). You cannot speed up the review process in either case. It requires a lot of work to start your broker-dealer, but when accomplished it has the potential to pay off extremely well.
start a broker-dealer -advantages
The most significant benefit of starting a broker-dealer is that you have the freedom to do things in the way you want them. Mainly, because there is no unnecessary bureaucracy. If you're going to increase your chances of being successful, you need to build a scalable business. Make sure you have experienced management personnel that can lead and navigate through the hard times. You will also need to have enough capital, memberships, and licenses including the following :
1. Allows the selling of investment products.
2. (FINRA)membership, i.e., Financial Industry Regulatory Authority.
3. Approved Broker-dealer from the SEC securities and exchange commission.
4. (SIPC) membership, securities investor protection.
start a broker-dealer -conclusion
Starting your own independent business comes with a lot of substantial risk and rewards. See it as investing in yourself rather than in a management team that you don’t even know. However, bear in mind that in the early days you alone will be doing all the work to get things up and running. If you make a plan and make your plan work for you, there is a high potential of being a very successful broker-dealer with very high returns.