Wednesday’s Word: Broker

By Dylan Donley, Spring 2014 Graduate Research Assistant

A broker is defined by Section 3(a)(4) of the Securities Exchange Act of 1934 as “any person engaged in the business of effecting transactions in securities for the account of others…” The term person contemplates entities as well as individuals. In handling investor accounts, brokers generally charge a fee or commission to execute security purchases and sales submitted by an investor. There are also certain types of accounts, known as discretionary accounts, where brokers are given the latitude to make investment decisions for their clients based on the set needs and risk tolerance of the client.