A stockbroker is a regulated professional individual, usually associated with a brokerage firm or broker-dealer, who buys and sells stocks and other securities for both retail and institutional clients, through a stock exchange or over the counter, in return for a fee or commission. Stockbrokers are known by numerous professional designations, depending on the license they hold, the type of securities they sell, or the services they provide. In the United States, a stockbroker must pass both the Series 7 and either the Series 63 or the Series 66 exams in order to be properly licensed.
Educational requirements
It is technically possible to become a stockbroker without a college education. Perhaps the best known example of this is Chris Gardner upon whom the film The Pursuit of Happyness is based (although he had undergone education during his time in the Navy). His example is, however, an extremely rare event. For all practical purposes a stockbroker must have at least a bachelor's degree. Further, candidates that have a Masters of Finance or a master's degree in a related field are in higher demand and tend to receive higher compensation than bachelor's degree holders. In addition to an education background in finance, brokerages must sponsor applicants in order for them to be able to take the required industry exams.
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Licensing and training requirements
Canada
In Canada, a stockbroker is called a "Registered Representative" or an "Investment Advisor". To be licensed as a Registered Representative and thus 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 (CSC), the Conduct & Practices Handbook (CPH), and the 90 day Investment Advisor Training Program (IATP). Within 30 months of obtaining their designation as a "Registered Representative", the registrant is further required to meet the post-licensing proficiency requirement to complete the Wealth Management Essentials course (WME). 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 (IIROC). To trade options and/or futures, a Registered Representative must pass the Derivatives Fundamentals Course (DFC) in addition to the Options Licensing Course (OLC) and/or the Futures Licensing Course (FLC), or alternatively, the Derivatives Fundamentals Options Licensing Course (DFOL) for options.
Hong Kong
To become a representative one has to work for a licensed firm and pass 3 exams to prove one's competency. Passing a fourth exam results in obtaining a 'specialist' license. All tests can be taken with the HKSI. However, passing all tests doesn't result in automatically obtaining the license. It still needs to be approved by the financial regulatory body.
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 and SGX.
United Kingdom
Stockbroking is a regulated profession in the UK and brokers must achieve a recognised qualification from the Financial Conduct Authority (FCA)'s Appropriate Qualifications list.
A number of qualifications are available and the one a trainee does will depend on their duties and their employer.
Qualifications include:
- CISI Level 4 Diploma in Investment Advice
- CISI Level 7 Diploma in Wealth Management
- The Chartered Institute for Securities and Investment (CISI) is the largest UK professional body for those who work in the securities and investment industry. It evolved from the London Stock Exchange, has around 40,000 members in over 100 countries and delivers more than 37,000 exams each year.
CFA UK also offers qualifications. It represents the interests of around 11,000 investment professionals and is part of the worldwide network of members of the CFA Institute.
United States
While the term "stockbroker" is still in use, more common terms are "broker", "financial advisor", "registered rep." or simply "rep." -- the latter being abbreviations of the official Financial Industry Regulatory Authority (FINRA) designation "Registered Representative," obtained by passing the FINRA General Securities Representative Exam (also known as the "Series 7 exam") and being employed ("associated with") a registered broker-dealer, also called a brokerage firm or (in the case of some larger money center broker/dealers) a "wirehouse", typically a FINRA member firm. Other FINRA licenses or series exams exist. Individuals holding some of those licenses, such as the "Series 6", cannot be called stockbrokers since they are prohibited from selling stock and are not trained or licensed in the full array of capabilities of a Series 7 stockbroker (see list of securities examinations). 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.
Related professions
Professional titles similar to that of stockbroker include investment advisor, and financial advisor. A "financial advisor" may or may not be a stockbroker, since some Series 6 licensed individuals--who are prohibited from selling stock--have that as their professional title. An "investment advisor", registered investment advisor, or investment advisor representative has training and capabilities similar to that of a stockbroker, but different licensing and different regulatory oversight. Many individuals hold both licenses, and might typically manage commission-based accounts as a stockbroker and fee-based accounts as an RIA investment advisor, or investment advisor representative (IAR).
The Financial Industry Regulatory Authority (FINRA) provides an online tool designed to help understand professional designations.
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