The different types of broker's licenses:
The securities industry is, I think, the most regulated industry on the planet. I suspect this is due primarily to the fact that you can make a very large amount of money in a very short period of time.
In order to work at a firm that sells securities [stocks, bonds, options, futures contracts, etc.] you gotta have a license. (Tokyo Latino or whatever he calls himself does not have a license, because he buys stocks in his own personal account and then tells other people to buy them, and a licensed broker maybe goes to the Federal Graybar Hotel for that if he gets caught. )
An ordinary "stockbroker" has, at a minimum, a Series 7 license. He's a "seven". There is a lot of stuff he can get in Major Trouble for if he screws up; from calling somebody he never talked to before at the wrong time of day to calling somebody in the wrong state and lots of stuff in between. If you sell securities through a firm, or even talk about it, and you don't have a license, and Dad catches you, you are, as they say, "Texas Toast".
This stuff is all covered in the Securities Exchange Act of 1934; that is the reference document if you want to see the Actual Specific Facts.
Some of the different licenses and a homestyle description of each:
Series 3- commodity futures license
Series 4- this is a "ROP", Registered Options Principal. You gotta have a current 7 or you can't get a 4. A 7 can sell options without a 4, but if you have a broker that is making options trades for you, you might want to ask him if he is a 4.
Series 6- can sell mutual funds and insurance products only
Series 7- General Securities Representative License, [AKA "registered rep" or "a Seven"]. This is the first license that a stockbroker gets. They can expire. Registered Reps don't let their licenses expire as a general rule.
Series 8 - Sales Supervisor, you gotta have a current 7 or you can't get an 8.
Series 11- Assistant Rep Order Processing (AROP) can take an unsolicited order, fill out a new account card, and other stuff.
Series 63- the license that a rep or a broker must have to sell securities in a specific state. All 7s have a 63.
Series 24- General Securities Principal License, kinda like a "Manager". You gottta have a 7 to get a 24, and you gotta have all the other licesnse that everybody has that you are training or bossing around. You can't just hold a 24 and not a 3 if you are yapping at your rookie commodity salesman, for example. If there is a 4 at the firm, then his boss, the 24, has to have a 4 too. The person that whips the 7 that just screwed up on the phone is the 24 (under ideal circumstances); it's his ass if some customer gets cranky or one of his boys gives a customer a price and time prediction like "double in the next 7 months". Regular folks have no idea what kind of trouble a 24 can get into if things go wrong on his day off.
Broker-Dealer- this is called a "BD" and is the license the FIRM and the OWNER of the firm has to have to do business. AKA "Big Fill-in-the -blank"
So basically, the OWNER of the firm, THE FIRM ITSELF, and every dang person that WORKS at the firm with the exception of the guy that cleans the coffee machine, has at least one license and probably 4 or 5, and they all have to be kept up or they expire.
The hypesters and stock touts don't have to follow the same rules, they have no liability if they do not have a license and don't work at a firm. A tout can, for example, buy 50,000 shares of stock, then put out an e-mail that says "Buy this, it is going to double this afternoon, and when it does I am going to sell everything I already bought before I sent you this e-mail" and no law is broken as far as I know. If a 7 did that, his clothes would be out of style when he woke up.
Next time: how firms make hundreds of millions of dollars not counting "commissions".
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