Practical Application

Like virtually all investment professionals, Amy Adams will never register as a broker-dealer. In reality, the number of broker-dealers in the country may number less than 1,000 and the vast majority of these are firms, not individual professionals. However, these broker-dealers may literally employ hundreds of thousands of investment professionals as agents.

The firm that Amy Adams works for is one such firm. In addition to acting as an investment advisor to some of its customers for an agreed-upon fee as discussed in Chapter 1, it also acts a broker-dealer for the same and other customers. In this role, Wealth Management, Inc. buys and sells securities to and from its clients, to and from its own account, as well as helping them to buy and sell securities in the open market from unrelated investors. For these services, her firm often receives a commission for helping to enact the transaction.

Because of its substantial size and breadth of activities, Amy Adams’s firm has to register both with federal regulators as a broker-dealer,