Is Fidelity a Broker Dealer and What Are the Regulations?

Fidelity is indeed a broker-dealer, registered with the Securities and Exchange Commission (SEC) as a broker-dealer firm.

To understand the regulations, let's break it down. Fidelity is subject to the regulations set forth by the SEC, including the Securities Exchange Act of 1934. This act requires broker-dealers to register with the SEC and comply with its rules and regulations.

As a broker-dealer, Fidelity must also comply with the Financial Industry Regulatory Authority (FINRA) rules, which govern the conduct of broker-dealers. This includes rules related to sales practices, trading, and customer accounts.

Fidelity must also maintain a certain level of capital and liquidity to ensure it can meet its financial obligations, as required by the SEC and FINRA.

A broker-dealer is a person or firm in the business of buying and selling securities for its own account or on behalf of its customers. This term is used in U.S. securities regulation to describe stock brokerages.

Most broker-dealers act as both agents and principals, meaning they execute orders on behalf of their clients as brokers, and trade for their own account as dealers.

A brokerage acts as a broker when it executes orders on behalf of its clients, whereas it acts as a dealer, or principal when it trades for its own account.

Broker-dealers are subject to regulation and oversight to ensure they operate fairly and transparently.

Fidelity is a well-known broker-dealer, and understanding the types of brokers and dealers can help you navigate the world of securities trading.

A broker facilitates security trades on behalf of investors, while a dealer facilitates trades on behalf of itself. The terms "principal" and "dealer" can be used interchangeably.

Some dealers, known as primary dealers, work closely with the U.S. Federal Reserve to help implement monetary policy. Primary dealers are obligated to participate in the auction of debt issued by the U.S. government.

Broker-dealers, like Fidelity, are buyers and sellers of securities, and they are also distributors of other investment products. As dealers, they act on behalf of the brokerage firm, initiating transactions for the firm's own account.

Examples of broker-dealers include Charles Schwab, Morgan Stanley's E-Trade, and Fidelity.

Full-service brokers offer one-on-one personal service, providing specific investment recommendations and planning and advice services.

They can help with retirement planning, long-term care planning, and estate planning, as well as formulating a personal investment strategy to cover financial goals like a home purchase or a child's education.

Full-service brokers provide ongoing assistance, including face-to-face meetings and periodic checkups to revisit progress toward goals.

For novice investors or those too busy to plan for themselves, full-service brokers offer an array of useful services and information.

Discount brokers, on the other hand, provide trade execution and are often online brokers where investors can select a security and purchase it without speaking to another person.

Discount brokers offer an inexpensive way to purchase securities for investors who know exactly what they want to buy.

Some discount brokers also offer online tools and research to help do-it-yourself investors generate ideas and research securities.

The limited service offering of discount brokers is significantly less expensive than working with a full-service broker, but it's wise to clarify any misconceptions before hiring one.

There are two main types of brokers: full-service and discount. Full-service brokers provide one-on-one personal service, including investment recommendations and ongoing assistance.

They offer a wide range of services, from retirement planning to estate planning, and even help with financial goals like buying a home or funding a child's education. This level of service comes at a cost, however.

Discount brokers, on the other hand, focus on trade execution. They're often online brokers that allow investors to log on, select a security, and purchase it without ever speaking to another person. This approach is significantly less expensive than working with a full-service broker.

Some discount brokers also offer online tools and research to help do-it-yourself investors generate ideas and research securities. These tools can be a great resource for investors who are self-sufficient and know exactly what they want to buy.

Dealers, also known as principals, are similar to brokers but facilitate trades on behalf of themselves, not investors. They often work with the U.S. Federal Reserve and help implement monetary policy by bidding on Treasury bonds and other securities.

A broker facilitates security trades on behalf of investors, while a dealer facilitates trades on behalf of itself. The terms "principal" and "dealer" can be used interchangeably.

The Financial Industry Regulatory Authority (FINRA) regulates dealers, who are obligated to participate in the auction of debt issued by the U.S. government. Primary dealers work closely with the U.S. Federal Reserve to help implement monetary policy.

A broker is an individual or financial services company that enables the trading of securities for other individuals. Dealers, on the other hand, enable the trading of securities for themselves.

Dealers, such as primary dealers, bid on Treasury bonds and other securities to create and maintain liquid markets. They assist in the smooth functioning of domestic securities markets as well as transactions with foreign buyers.

To get into the securities business, financial services professionals need to obtain licenses like the Series 7, Series 6, and Series 63. These licenses enable them to sell securities products, mutual funds, and variable annuities, among other things.

To become a broker-dealer, you'll need to meet certain qualification requirements. Every individual who is a broker-dealer, or a compliance supervisor, or reported agent of a broker-dealer must pass a securities examination.

The examination requirement is the Uniform Securities Agent State Law Examination ("Series 63") or Uniform Combined State Law Examination ("Series 66").

Regulation plays a crucial role in ensuring compliance with various requirements. In the healthcare industry, for example, regulations are in place to protect patient data and maintain confidentiality.

The Health Insurance Portability and Accountability Act (HIPAA) requires healthcare organizations to implement strict data protection measures. This includes encrypting electronic protected health information (ePHI) to prevent unauthorized access.

Regulatory bodies, such as the Food and Drug Administration (FDA), oversee the development and approval of medical devices. Manufacturers must comply with guidelines set forth by the FDA to ensure their products meet safety and efficacy standards.

In the financial sector, regulatory requirements are designed to prevent money laundering and terrorist financing. The Bank Secrecy Act (BSA) requires financial institutions to report suspicious transactions and maintain accurate records.

Compliance with regulations can be a complex and time-consuming process. However, it's essential for organizations to stay up-to-date on changing regulations to avoid penalties and reputational damage.

To qualify as a broker-dealer, compliance supervisor, or reported agent, you must pass a securities examination as specified in CCR §260.217(a)(1). This requirement is also applicable to the SEC and self-regulatory organizations that the broker-dealer is a member of.

The Uniform Securities Agent State Law Examination (Series 63) and the Uniform Combined State Law Examination (Series 66) are the specific examinations you'll need to pass. These exams are administered by FINRA.

You'll also need to meet all applicable examination requirements, which are outlined in the relevant regulations. This ensures that everyone working with a broker-dealer has the necessary knowledge and skills to do their job effectively.

Massachusetts' Securities Regulator, William Galvin, has filed an administrative complaint against Fidelity Brokerage Services for its lack of diligence in approving customers' accounts for options and margin trading.

The state regulator accused Fidelity Brokerage Services of having a "halfhearted and lackadaisical attitude" when it came to protecting retail investors.

Fidelity Brokerage Services failed to reasonably perform due diligence related to approving customers' accounts, which is a violation of Massachusetts securities laws.

This led to financial losses for investors who were not properly vetted before being allowed to engage in high-risk trading activities.