Experience is necessary to work as a Stock Broker. Stock brokers can win or lose a lot of money in a day and this will have a huge impact to investors or clients. Having enough experience in the industry will give you an edge in managing your own stock broking business. You can also work for another stock broker when you're still trying to gain experience. This is also an excellent way to meet a lot of potential investors.
To start your own Stock Broking Business, you should be a registered
broker. The tests will be divided into seven series and you will need to
pass them all. If you still haven't taken the test, you can team up with
a registered broker so that you can open a new business. The registered
broker will then become your partner. In a stock broking business, you
can remain as a broker or you can also become a dealer. You will be the
one to buy and sell securities. As a dealer, you will own stocks and you
will sell them as well. Most of today's stock broking businesses are
both brokers and dealers.
I. Registration of Stock Brokers
A broker is none other than a commission agent who transacts business in
securities on behalf of his clients who are non-members of a stock
exchange . Thus, a non-member can purchase and sell securities only
through a broker who is a member of the stock exchange. To deal in
securities on recognized stock exchanges, the broker should register.
A stock broker must possess the following qualifications to register as
a broker:
i. He must be a citizen with 21 years of age.
ii. He should neither e a bankrupt not compounded with creditors.
iii. He should not have been convicted for any offence, fraud.
iv. He should not have engaged in any other business other than that of
a broker in securities.
v. He should not be a defaulter of any stock exchange.
vi. He should have completed 12th standard examination.
Apart from individuals, corporate and institutional members can also
become brokers. Brokers will be selected by the selection committee of
the stock exchange on the basis of their qualifications, experience,
financial status, their performance in the written test, interview etc.
II. Registration Procedure
The prospective broker must apply through the stock exchange of which he
is a member .
The stock exchange should forward the application within 30 days of
receipt of the application .
After going through the application the security exchange board may call
for additional information or clarifications if necessary regarding the
dealings in securities. They may also request the applicant to appear
before it for personal representation.
After ascertaining whether the applicant is eligible to be admitted as a
member and whether he has the necessary infrastructure facilities, they
may grant a certificate to the stock broker. The stock exchanges
concerned will be duly informed of the same.
The certified stock broker must abide by the prescribed code of conduct
.
The stock broker has to pay the prescribed registration fees .
The registration of a broker will be suspended if the broker violates
and provisions of the rules and regulations of the exchange and if he
does not follow the prescribed code of conduct .
The registration will be cancelled if the broker is convicted of a
criminal offence or guilty of fraud or if he repeatedly violates the
provisions of the rules and regulations of the stock exchange or the
prescribed code of conduct.
Every stock broker has to maintain a minimum amount of deposit called
security deposit or base minimum capital with the stock exchange .In
addition to the above, every broker has to maintain additional capital
depending upon his business volume not exceeding 8 percent of his gross
outstanding business in the exchange including the security deposit.
III. Code of Conduct for Stock Brokers
To discharge the duties on the best interest of investors and other
stock brokers, a code of conduct has been prescribed for brokers in
accordance with the statutory requirements. They have been briefly
summarized below:
A stock broker must honestly and promptly execute all orders for buying
and selling of securities of the best possible market price. He must
make prompt payment to his clients in the case of sales and prompt
delivery in the case of purchases.
He should not discriminate small investors against big investors .
He must issue a contract note for all transactions as specified by the
stock exchange without any delay .
He must maintain complete secrecy of his client s personal investments
and other information of a confidential nature.
He should not induce or initiate purchases or sales just for the sake of
his brokerage or commission.
He should not give any false or misleading information with a view to
encouraging purchases or sales and thereby getting his commission.
He should not entertain those clients who have failed to carry out their
commitments in respect of securities with other stock brokers.
The capacity in which he is acting must be duly informed to his client .
In other words, he must disclose whether he is acting as a principal or
as an agent. In all cases, he must give top priority to his clients
interest.
He is not expected to render ay investment advice except under those
circumstances which warrant it.
He must possess adequate infrastructure facilities and maintain proper
staff to render prompt, efficient and fair services to his clients.
He should not advertise his business publicly except when it is
permitted by the stock exchange.
He should not adopt any unfair practices with a view to attracting
clients from other brokers.
He should not knowingly and willfully deliver documents which constitute
bad delivery .