What is the difference between a broker-dealer and an investment adviser?

The primary difference between a broker-dealer and an investment adviser is the type of services they provide to clients. A broker-dealer is a firm that buys and sells securities for its own account, for the account of its customers, and for the account of other brokers and dealers. They provide the services required to facilitate the purchase and sale of securities and generate commissions. An investment adviser is a firm that provides advice to clients on investments and makes recommendations related to securities, such as stocks, bonds, and mutual funds. An investment adviser is subject to the federal Investment Advisers Act of 1940, which requires them to provide advice that is suitable for the client based on their situation. Investment advisers are generally compensated in the form of fees paid by their clients. In California, any person who is in the business of offering or trading in securities must register as a broker-dealer or investment adviser representative with the California Department of Business Oversight. Both broker-dealers and investment advisers must comply with the applicable state and federal securities laws, including the rules of the Financial Industry Regulatory Authority (FINRA). Additionally, in California, investment advisers must register with the regulatory authority if they manage the securities of more than five clients.

Related FAQs

What is the role of the NASD in regulating the securities industry?
What are the types of investments most vulnerable to fraud?
What should I do if I believe I may be the victim of investment fraud?
What type of people are most likely to be the victims of investment fraud?
What are the consequences of investment fraud?
What is a Securities Exchange Act of 1934 violation?
What is the difference between a registered and unregistered security?
What are the penalties for investment fraud?
What should I know about mutual fund fees?
What should I do if I suspect investment fraud?

What is the difference between a broker-dealer and an investment adviser?

Related FAQs

Related Blog Posts