An independent broker-dealer is legally authorized to sell securities and investment products without acting as an agent of a larger organization. The requirements for becoming a broker-dealer are more in-depth than requirements for salespeople or agents. As a broker-dealer, you can maximize your profit from all transactions by bypassing broker fees and salesperson commission structures. Independent broker dealers often open their own financial advisory businesses to realize their goals of financial independence. Instructions 1 Obtain licenses or certifications required at the federal and state level to sell your chosen investment products. The Series 6 exam, for example, is required to sell mutual funds and annuities. The Series 7 is required to sell securities directly. Other certifications may be required for insurance products and other investment vehicle sales in your state as well. 2 Join the Financial Industry Regulatory Authority (FINRA) as a member. FINRA is a Self-Regulatory Organization (SRO), meaning it enforces ethics rules and procedural guidelines without the authority of the Federal Government. Organizations like FINRA derive their authority from their members, who follow the organization’s guidelines in an attempt to keep the government from stepping in and using legal authority to enforce industry codes of conduct. 3 Join the Securities Investor Protection Corporation (SIPC) as a member. The SIPC acts to reimburse investors who have lost their capital contributions due to the bankruptcy or financial distress of investment companies. Becoming a member of the SIPC can be likened to buying an insurance policy for your clients’ benefit. Although this may seem counter-intuitive, joining the SIPC is a federal requirement for all independent broker-dealers. 4 Complete and submit a separate SEC Form BD for each state in which you wish to do business. Form BD is quite involved, and may take some time to complete. In addition to requiring company information such as Employer ID Number and contact information, Form BD requires applicants to go into detail about their specific business intent, including the types of products the applicant wishes to sell, the state in which securities will be sold and the company’s legal form of organization. The application takes you through a series of questions designed to probe your personal and professional history as well, covering everything from potential conflicts of interest to felony convictions. 5 Fulfill all state requirements for independent broker dealers. According to sec.gov, each state imposes different requirements on broker-dealers. Follow the link to the website of the North American Securities Administrators Association (NASAA), which contains information on state-specific requirements.
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