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Section 3(a)(4)(A) of the Securities and Exchange Act of 1934 (the “Act”) generally defines a “broker” broadly as any person engaged in the business of effecting transactions in securities for the account of others.
Sometimes you can easily determine if someone is a broker. For instance, a person who executes transactions for others on a securities exchange clearly is a broker. However, other situations are less clear. For example, each of the following individuals and businesses may need to register as a broker, depending on a number of factors, which are too complicated to discuss herein. A few examples are: “finders,” “business brokers,” and other individuals or entities that engage in the following activities:
In order to determine whether any of these individuals (or any other person or business) is a broker, one would look at the activities that the person or business actually performs. The facts associated with the activity are important. Many times, it is necessary to hire a qualified professional to assist in making the determination as to whether or not the individual or business is functioning as a broker.Who May be Classified as a “Dealer”?
Unlike a broker, who acts as agent, a dealer acts as principal. Section 3(a)(5)(A) of the Act generally defines a “dealer” as: any person engaged in the business of buying and selling securities for his own account, through a broker or otherwise.
The definition of “dealer” does not include a “trader,” that is, a person who buys and sells securities for his or her own account, either individually or in a fiduciary capacity, but not as part of a regular business. Individuals who buy and sell securities for themselves generally are considered traders and not dealers.
Sometimes you can easily tell if someone is a dealer. For example, a firm that advertises publicly that it makes a market in securities is obviously a dealer. Other situations can be less clear. For instance, each of the following individuals and businesses may need to register as a dealer, depending on a number of factors:
Broker-dealers, who operate in their capacities as such, are subject to a substantial number of federal and state statutes, rules and regulations designed to protect members of the investing public. If you have lost money as a result of your association with a broker-dealer, you should contact a qualified professional to review your particular situation.
Please keep in mind that the above information is being provided for educational purposes only. It is not designed to be complete in all material respects and that any statutes, rules or regulations referenced may be modified, from time to time. Thus, it should not be relied upon as legal or investment advice.Contact Us
With extensive courtroom, arbitration and mediation experience and an in-depth understanding of securities law, our firm provides all of our clients with the personal service they deserve. Handling cases worth $25,000 or more, we represent clients throughout Florida and across the United States, as well as for foreign individuals that invested in U.S. banks or brokerage firms. Contact us to arrange your free initial consultation.