Post

What a Securities Broker Does and How to Become One

What a Securities Broker Does and How to Become One
Post

What a Securities Broker Does and How to Become One

17 Sep 2020By Samantha

People often find themselves confused about the many roles that different professionals play in the financial industry. A securities broker happens to be one of the jobs that many people cannot wrap their heads around unless they are in the investment or financial sector. The job of a securities broker has roots in history, as it is closely tied to the development of early trading and the establishment of drafts, bills of credits, and banknotes. The existence of security brokers or traders is quite essential to the current and future financial flow of the world. It’s a tempting job with good pay and a potentially glamorous career, which is why we’ve made this guide to help you wrap your head around what the job of a securities broker entails and its requirements.

The Definition of a Security

Security is a fungible asset, which means it can be interchanged with another asset of similar value, like different bills of money. Aside from being fungible, security is also an asset that holds financial power or monetary value. They are often used as assets to raise capital in investment markets. In any market, 3 different types of securities exist; equity, debt, and hybrids. The trading and brokering of securities are managed by various self-regulated organizations such as the NASD, NASAA, FINRA, NFA, and governmental financial bodies like the SEC.

What Does a Security Broker Do?

The financial markets and regular consumers require a link to be able to synchronize the supply and demand movements, and that link happens to be the securities broker. There are many job titles that can be used interchangeably with “security broker,” including financial service sales agent, commodity sales agent, and others. Security brokers handle the purchase or selling of securities, and they also advise clients on the best available investment opportunities based on their experience in the field.

Naturally, the most common securities that security brokers operate with are stocks and bonds because of their abundance and available investment opportunities. But, to be able to obtain licenses for securities like these, many prerequisites are due. When private companies start to operate publicly through an initial public offering (IPO), the stocks bought by people can bring in profits in the form of dividends, making it one of the most popular forms of financial investments that security brokers’ licenses enable.

Series 7 License

To become a securities broker, there are some licenses that you need to obtain to be able to operate legally and properly. Even though there are numerous licenses available, series 6 articles are amongst the most important licenses you need to have to be able to handle security assets. Officially known as the General Securities Registered Representative license, the Series 7is obtained through the FINRA, the legal framework that regulates the selling of securities to maintain transparency and legality. Any broker that has obtained this license is allowed to trade in stocks, bonds, mutual funds, annuities, business options, program partnerships, mortgage, and other assets.

The assets that are not to be sold under a Series 7 license include commodities and futures. As long as you are in a self-regulated organization or in a firm that belongs to FINRA, the license continues to be valid. Once a termination or resignation occurs, the license will expire after two years of not being re-employed in a similar organization or firm. FINRA offers a complete breakdown of all the requirements and qualifications needed for the license on their website. If you’re planning on working as a stockbroker, investment funds, or banks, the Series 7 license is a serious requirement before applying.

Series 63 License

The Uniform Securities Agent License, called the Series 63 license, is a necessary license to trade in securities in many states. Unless the state you’ll be operating in is Florida, Colorado, Louisiana, or Maryland, you won’t be able to trade with securities without the Series 63. Similar to the Series 7 license, the duration of the license is valid as long as you are working for a FINRA firm or self-regulated organization, with a 2-year window for finding employment after termination or resignation.

Series 6 License

The Series 6 license, referred to as the Investment Company and Variable Contracts Products Representative license, makes it possible for licensees to trade in mutual funds related to investment and insurance products. It’s a bit more difficult to obtain because it requires sponsorship by a FINRA firm or self-regulated organization. It’s one of the most sought out licenses by securities brokers. The qualification exam for Series 6 is composed of 50 scored questions, designed to gauge the holder’s potential in attracting business clients, determining investment goals, profiling accounts, investment recommendations, and processing transactions properly.

The path to becoming a securities broker is far from easy. But, the potential that such a job offers is quite lucrative, especially when you take into account the investment opportunities and extensive market knowledge that you can gain from it. Aside from being eager to dabble in such a market, the requirements mainly include obtaining the needed licenses through official channels.