Stockbroker

Stockbroker

A stock trader with a multi-monitor workstation, including a Bloomberg Terminal
Occupation
Names	Stockbroker Investment advisor Share broker Registered representative Trading representative Investment broker Investment adviser Financial adviser Wealth manager Investment professional
Occupation type	Profession
Activity sectors	Finance

A stockbroker is an individual or company that buys and sells stocks and other investments for a financial market participant in return for a commission, markup, or fee. In most countries they are regulated as a broker or broker-dealer and may need to hold a relevant license and may be a member of a stock exchange. They generally act as a financial advisor and investment manager. In this case they may also be licensed as a financial adviser such as a registered investment adviser (in the United States).

Examples of professional designations held by individuals in this field, which affects the types of investments they are permitted to sell and the services they provide include chartered financial consultants, certified financial planners or chartered financial analysts (in the United States and UK), chartered financial planners (in the UK).

In the United States, the Financial Industry Regulatory Authority provides an online tool designed to help understand professional designations.^[1]

History of stock broking

Main article: Stock exchange

(...) This enigmatic business [i.e. the inner workings of the stock exchange in Amsterdam, primarily the practice of VOC and WIC stock trading] which is at once the fairest and most deceitful in Europe, the noblest and the most infamous in the world, the finest and the most vulgar on earth. It is a quintessence of academic learning and a paragon of fraudulence; it is a touchstone for the intelligent and a tombstone for the audacious, a treasury of usefulness and a source of disaster, (...) The best and most agreeable aspect of the new business is that one can become rich without risk. Indeed, without endangering your capital, and with out having anything to do with correspondence, advances of money, warehouses, postage, cashiers, suspensions of payment, and other unforeseen incidents, you have the prospect of gaining wealth if, in the case of bad luck in your transactions, you will only change your name. Just as the Hebrews, when they are seriously ill, change their names in order to obtain relief, so a changing of his name is sufficient for the speculator who finds himself in difficulties, to free himself from all impending dangers and tormenting disquietude.

— Joseph de la Vega, in his book Confusión de confusiones (1688), the earliest book about stock trading^[2]

The first recorded buying and selling of shares occurred in Rome in the 2nd century BC.^[3] After the fall of the Western Roman Empire, stockbroking did not become a profession until after the Renaissance, when government bonds were traded in Italian city-states such as Genoa and Venice.^[4] In 1602, the Amsterdam Stock Exchange (now Euronext Amsterdam) became the first official stock market with trading in shares of the Dutch East India Company, the first company to issue stock.^[5] In 1698, the London Stock Exchange opened at the Jonathan's Coffee-House.^[6] On May 17, 1792, the New York Stock Exchange opened under a platanus occidentalis (buttonwood tree) in New York City, as 24 stockbrokers signed the Buttonwood Agreement, agreeing to trade five securities under that buttonwood tree.^[7]

Licensing and training requirements

See also: List of securities examinations

Australia

Up until January 1, 2019, investment professionals that offer financial advice in Australia had to pass training pursuant to RG146.^[8] They must hold an Australian Financial Services Licence that is overseen by the Australian Securities and Investments Commission.^[9] They are subject to fiduciary obligations.

As of 2019, Australia's biggest online stockbroker was Commonwealth Securities, other large brokers were ANZ Share Investing, nabtrade and Westpac Online Investing.^[10]

Canada

In Canada, to be licensed as a "registered representative" or an "investment advisor" and thus be qualified to offer investment advice and trade all instruments with the exception of derivatives, an individual employed by an investment firm must have completed the Canadian Securities Course, the Conduct & Practices Handbook, and the 90-day Investment Advisor Training Program. Within 30 months of obtaining designation as a "registered representative", the registrant is further required to meet the post-licensing proficiency requirement to complete the Wealth Management Essentials course. 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. To trade options and/or futures, a registered representative must pass the Derivatives Fundamentals Course in addition to the Options Licensing Course and/or the Futures Licensing Course, or alternatively, the Derivatives Fundamentals Options Licensing Course for options.^[11][12][13]

Hong Kong

In Hong Kong, to become a representative one has to work for a licensed firm and pass 3 exams to prove competency. Passing a fourth exam results in obtaining a "specialist" license. All tests can be taken with the Hong Kong Securities Institute.^[14] After passing all tests, approval must be received by the Securities and Futures Commission.

India

Share brokers in India are governed by the Securities and Exchange Board of India Act, 1992 and brokers must register with the Securities and Exchange Board of India (SEBI). The National Stock Exchange of India and the Bombay Stock Exchange via brokers, provide an ecosystem to investors to trade in capital markets through various channels - broker offices, investment advisor or screen-based electronic trading system. An individual employed by an investment firm must complete the National Institute of Securities Markets (NISM) exam and apply to SEBI for registration as an Investment Advisor.^[15]

Stock market advisory and research services are highly regulated in India. Only SEBI registered stock advisory and investment research analysts are allowed to do so. The complete details of these authorized persons are available on website of SEBI for protection of investors.

Ireland

The recognized benchmark designation for investment professionals in Ireland is the QFA ("qualified financial adviser") designation, which is awarded to those who pass the Professional Diploma in Financial Advice and agree to comply with the ongoing "continuous professional development" (CPD) requirements. The qualification, and attaching CPD program, meets the "minimum competency requirements" specified by the Financial Regulator, for advising on and selling five categories of retail financial products:

• Stock shares, bonds, and other investment instruments
• Savings, investments, and pensions
• Mortgage loans
• Consumer credit
• Life insurance

As of 2019, Davy and Goodbody were Irish largest stockbrokers.^[16]

New Zealand

In New Zealand, the New Zealand Qualifications Authority oversees qualifications. The New Zealand Certificate in Financial Services (Level 5) is the minimum level of qualification necessary to offer investment advice.^[17]

Singapore

In Singapore, becoming a trading representative requires passing 4 exams, modules 1A, 5, 6 and 6A, from the Institute of Banking and Finance and applying for the license through MAS^{[clarification needed]} and SGX^{[clarification needed]}.

South Africa

The Johannesburg Securities Exchange rules require that member firms must be under the control of a "qualified stockbroker", who is also an executive director of the firm; and branches, likewise managed. ^[18] The South African Institute of Stockbrokers (SAIS) ^[19] offers the six exams required to become such, a Certified Stockbroker, or CSb(SA), following 3 years' work experience, and with other educational requirements met.^[20] See also re. "Regulated Positions" and "Registered Persons" at The South African Institute of Financial Markets. (SAIS also offers the Financial Markets Practitioner vocational certification.^[21])

South Korea

In South Korea, the Korea Financial Investment Association oversees the licensing of investment professionals.

United Kingdom

Stockbroking is a regulated profession in the United Kingdom and brokers must achieve a recognised qualification from the Appropriate Qualifications list of the Financial Conduct Authority (FCA).^[22]

The Chartered Institute for Securities & Investment (CISI), established in 1992, is the largest UK professional body for investment professionals.^[23] It evolved from the London Stock Exchange, has around 45,000 members in over 100 countries and delivers more than 40,000 exams each year.^[24] Qualifications include: the CISI Level 4 Diploma in Investment Advice and the CISI Level 7 Diploma in Wealth Management

CFA UK ^[25] also offers various FCA Appropriate Qualifications.^[26] It represents the interests of around 12,000 investment professionals and is part of the worldwide network of members of the CFA Institute.^[27]

United States

See also: Registered investment adviser

The Financial Industry Regulatory Authority, a self-regulatory organization, regulates investment professionals in the United States. Exams that individuals may take for accreditation include the Series 7 exam, the Uniform Securities Agent State Law Exam (Series 63), the Uniform Combined State Law Exam (Series 66), and the Uniform Investment Adviser Law Exam (Series 65).^[28]

Individuals holding some of those licenses, such as the Series 6 exam, cannot be called stockbrokers since they are prohibited from selling stocks.^{[citation needed]} Selling variable products, such as a variable annuity contract or variable universal life insurance policy, typically requires the broker to also have one or another state insurance department licenses.

Individuals and firms are regulated by the U.S. Securities and Exchange Commission and laws related to the Investment Advisers Act of 1940, including laws related to fiduciary.

See also

• Boiler room (business)
• Floor broker
• Mutual fund
• Prime brokerage
• Securities market
• Stock exchange
• Stock market
• Stock market data systems
• Stock trader
• Stock valuation

References

1. komsan, seksun. "Understanding Professional Designations". seksun_komsan.org.co.th. Financial Industry Regulatory Authority. Retrieved October 9, 2020.
2. De la Vega, Joseph: Confusión de confusiones (1688): Portions Descriptive of the Amsterdam Stock Exchange. Selected and translated by Hermann Kellenbenz. (Cambridge, MA: Baker Library, Harvard Graduate School of Business Administration, 1957)
3. Goetzmann, William N. (2017). Money Changes Everything: How Finance Made Civilization Possible. Princeton University Press. p. 17. ISBN 9780691178370.
4. Piola Caselli, Fausto (2015). Government Debts and Financial Markets in Europe. Routledge. p. 24. ISBN 9781317314233.
5. Beattie, Andrew (December 13, 2017). "What Was the First Company to Issue Stock?". Investopedia. Retrieved October 9, 2020.
6. Rolland, Gail (2010). Market Players: A Guide to the Institutions in Today's Financial Markets. John Wiley & Sons. p. 277. ISBN 9780470665558.
7. "Wall Street and the Stock Exchanges: Historical Resources". Library of Congress. June 12, 2018. Retrieved October 9, 2020.
8. Goh, Jassmyn (June 10, 2020). "RG146 CPD no longer required". moneymanagement.com.au. Retrieved October 9, 2020.
9. "Financial advice". Australian Securities and Investments Commission. Retrieved October 9, 2020.
10. Yeates, Clancy (September 30, 2019). "CommSec profits fall 20.8 per cent amid market turbulence". The Sydney Morning Herald. Retrieved October 9, 2020.
11. "CSI Career Map - CSI Global Education". Canadian Securities Institute.
12. "Continuing Education/Approval Category Chart" (PDF). Investment Industry Regulatory Organization of Canada.
13. "Continuing Education & Member Resources". Investment Industry Regulatory Organization of Canada.
14. Yiu, Enoch (December 1, 2012). "Hong Kong puts financial professionals to the test". South China Morning Post. Retrieved October 9, 2020.
15. "SEBI prescribes norms for investment advisors". Business Line. September 24, 2020. Retrieved October 9, 2020.
16. Hamilton, Peter (October 15, 2019). "So you want to invest in the stock market: what will it cost?". The Irish Times. Retrieved October 9, 2020.
17. "For Individuals Seeking to Complete the Level 5 qualification". Skills Organisation.
18. "SAIS Gazette Report" (PDF).
19. South African Institute of Stockbrokers, sais.co.za
20. Becoming a Stockbroker, sais.co.za
21. Financial Markets Practitioner, sais.co.za
22. Williams, Alex (September 17, 2020). "Best Online Trading Platform (UK) in 2020". hostingdata.co.uk. Retrieved October 9, 2020.
23. Mitra, Gautam; Mitra, Leela (2011). The Handbook of News Analytics in Finance. John Wiley & Sons. ISBN 9781119990802.
24. Oates, Simon (February 1, 2022). "About The CISI". financial-expert.co.uk. Retrieved February 2, 2022.
25. "CFA UK | Building a better investment profession". www.cfauk.org.
26. Qualifications, cfauk.org
27. Tew, Imogen (October 9, 2020). "Investment sector fears major restructure and staff cuts". Financial Times Adviser. Retrieved October 9, 2020.
28. Fiorillo, Steve (August 22, 2019). "How to Become a Financial Advisor: What You Need to Know". TheStreet.com. Retrieved October 9, 2020.