Jen: This is the PKF Texas Entrepreneur’s Playbook. I’m Jen Lemanski, and I’m back once again with Nicole Riley, one of our audit senior managers and one of the faces of PKF Texas’ broker-dealer team. Nicole, welcome back to the Playbook.
Nicole: Great to be here.
Jen: So, broker-dealer, what is that?
Nicole: So, a broker-dealer is a highly regulated company that traditionally buys and sells securities. That’s really where the name comes from is because they can be selling and buying for a customer where they’re the agent or the broker, or they could be buying and selling for their own accounts where they’re the principal in the transaction or a dealer, hence, broker-dealer.
But really the modern broker-dealer is doing more than just buying and selling securities, they publish investment research, they are helping companies raise capital, they’re helping clients find investments and place their money and they’re also providing investment advice.
Jen: Okay, so you mentioned highly regulated – what does that actually look like?
Nicole: So, they have a lot of people looking over their back and making sure that they’re doing what they’re supposed to be doing – following the rules. There are a lot of rules out there for broker-dealers, the capital and there’s a lot of money going on, so they want to make sure that they are doing what they’re supposed to be doing.
So, the main organization that oversees their activities is FINRA, or the Financial Industry Regulatory Authority. And FINRA actually got its authorization to oversee them by Congress. And so, it’s their task to make sure the American investors are protected and that the broker-dealer industry is operating fairly and honestly. What FINRA does is they come out and they perform their own audits of the organizations, they make sure that they’re following the rules, they are also looking at daily activities in the markets, and just a general oversight in rule making as well. So, then they also have to follow the SEC rules and answer to the SEC.
Jen: But they’re not public companies?
Nicole: They can be, but really, they can be of all shapes and sizes. I mean, you can have really small organizations that have just a few employees, but you could have very large publicly traded organizations as well.
Jen: Okay, well perfect. Well, we’ll get you to talk a little bit more about things that are gonna impact broker-dealers. Sound good?
Nicole: Sounds great.
Jen: For more information about broker-dealers, visit www.pkftexas.com. This has been another Thought Leader Production brought to you by PKF Texas the Entrepreneurs Playbook. Tune in next week for another chapter.