How to Start a Broker Dealer Business?

Independent broker dealers are securities and investment traders who operate autonomously from any external employer. 

Due to the complexity and risk involved in operating a small business as a broker-dealer, the legal prerequisites for getting started are more stringent than those associated with other brokers, like real estate agents or automotive salespeople. 

However, by acting independently, broker dealers can earn more than their peers at investment firms simply by bypassing commission policies and broker fees. 

So, do you want to know how to start a broker dealer business?  Procure mandatory federal and state certifications and licenses that authorize you to sell investment products. 

These vary based on the type of product you are selling. Depending on your state, other authorizations may be necessary for investment vehicle sales, insurance products, and other investment opportunities.

Become a member of the Financial Industry Regulatory Authority or another Self-Regulatory Organization. SROs operate independently of government entities to ensure ethical and procedural standards within the profession. FINRA is run democratically and thus derives its power from its membership. 

In many situations, this prevents governmental agencies like the federal Securities and Exchange Commission from intervening to regulate the industry and allows broker dealers to have a greater say in how their businesses will be operated. 

Become a member of the Securities Investor Protection Corporation. SIPC intervenes to compensate investors in the event of lost capital contributions that occur because of financial turmoil among investment companies or bankruptcy. 

Thus, SIPC membership, which is federally mandated for all independent broker dealers, acts as an insurance policy for your investment clients. Now, you have some idea of how to how to start a broker dealer company.

Moreover, submit a completed SEC Form BD (for "broker-dealer") for every state in which you plan to sell investment products. Form BD helps the SEC determine your personal and contact information -- including professional history, possible conflicts of interest, and any prior criminal convictions -- as well as information on any business partners or employees. 

Successful applications demonstrate high professional standards and fiduciary responsibility. Applicants also must include details on the types of securities that will be sold, the organizational and operational structure of the broker-dealer business, and a list of states in which investment products will be sold. 

Contact your state government's security regulator to learn about the legal requirements needed to begin working as an independent broker-dealer. If you want to consult on how to start a broker dealer business, you can contact BD Consulting Associates.