All broker dealers are required, besides being registered with the SEC, to additionally be a member of some approved SRO (self regulatory organization), of which the major two are the NASD and the NYSE.
If a firm is not an actual broker dealer, then they may be a DBA ("doing business as") entity of another broker dealer, a route some firms choose to follow while applying for their own BD license, etc.
Regardless, when assessing a brokerage firm for investment, there are some important facts to gather:
Business related brokerage questions:
1) Is the firm itself a broker dealer, or under a parent BD?
2) What SRO is the BD (whether the parent or the firm in question) a member of, so that disclosure information can be gathered?
3) The BD's (or, if a DBA - it's parent BD's) net capital - required and currently tabulated by the firms' Financial and Ops Principal?
4) The BD's (or, if a DBA - its' parent BD's) regulatory history
5) Self-clearing, or do they clear via correspondent relationship?
6) Whose software do they use? Is it proprietary, or via subscription agreement?
Financial questions:
7) How many employees, offices, products, revenue sources do they have - right now? Not soon, projected, almost - but right at this moment.
8) How many active accounts do they have - right now? Again, not soon, projected, by XYZ year - but right at this moment.
9) What was the firms' 1998 revenue? Net income?
10) What was the firms' 1st qtr 1999 revenues? Net income?
11) Operating margin, assets vs liabilities, etc...
These are some important things to ask for and assess when evaluating any brokerage firm. |
