Background
Making a decision to start a broker/dealer can be a daunting task where much time and deliberation needs to be applied. Prior to starting the process for the establishment of a broker/dealer, all individuals and entities should ask the following questions:
- Why do you want or need to create a broker/dealer?;
- Are there alternatives to forming a broker/dealer?; and
- Does establishing a broker/dealer make economic and business sense?,/li>
Regulatory Agencies
The primary regulator through whom you seek approval as a broker/dealer is FINRA. Upon submission of the New Member Application, FINRA begins the process of determining whether it will approve or deny a firm to operate as a broker/dealer. Approval will also need to be sought with the SEC and various states. You may need to seek approval with other regulatory bodies, such as the MSRB, depending on your business activities.
Length of the Process
FINRA has up to six months from the date of submission of the New Member Application to approve or deny the request to form a broker/dealer. At least one month of work will be needed for the creation and compilation of various documents prior to the application being filed. The time needed to establish a broker/dealer will vary among firms. Our experience has shown that the process moves faster with good organization, promptness in responding to FINRA, and the more complete an application is upon initial filing with FINRA.
Steps to be Undertaken
Numerous actions and steps are necessary prior to submitting a New Member Application to FINRA. Among the initial steps are:
- forming a legal entity
- submitting a name reservation to FINRA;
- submitting fees and dues to FINRA; and
- completing the Form BD and entitlement forms.
During and immediately following the initial steps, extensive efforts and time commitments are required in compiling, creating, and completing various documents to be submitted alongside the New Member Application. Some of the most extensive records required by FINRA for all firms are:
- a business plan;
- written supervisory procedures;
- a business continuity program; and
- sample books and records.
Once the New Member Application and associated documents have been filed, FINRA will assess the application. This marks the beginning of the back-and-forth process between FINRA and a firm where clarification and additional records are sought. At the conclusion of FINRA’s review, FINRA will then indicate its decision and, for approved firms, require a Membership Agreement be executed.
How Can FIC Help?
FIC specializes in the establishment of broker/dealers. We have designed a highly-organized, systematic process to serve as the “quarterback” in your firm’s desire to seek approval as a broker/dealer. FIC will perform, among others, the following actions.
- Handle all communications promptly with FINRA as part of the broker/dealer approval process.
- Communicate steps and actions that your firm will need to take and those efforts to be undertaken by FIC.
- Provide regular updates as to the status of the broker/dealer approval process.
- Develop all policies and procedures in concert with any instructions and guidance provided by your firm.
- Provide forms and instructions on compliance and operational matters plus other books and records.
- Provide guidance on best practices and offer solutions to issues.
For those firms unsure as to establishing a broker/dealer, we can provide consultations that will help you make an informed decision.