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 should I do if I am approached by someone offering a “great” investment opportunity?
What is a Securities Exchange Act of 1934 violation?
What is the difference between a private and a public offering?
What documents should I review before investing?
What is the difference between a mutual fund and a hedge fund?
What is the purpose of a registration statement?
What is a private placement memorandum?
What is the purpose of the Investment Company Act of 1940?
What are the regulations governing the sale of securities?
What are the rules governing short selling?

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

Related FAQs

Related Blog Posts