Dealers are individuals or companies involved in the purchase of goods, as well as the sale or distribution of such products. Dealers may either be registered or casual.
In the context of securities transactions, a dealer is an individual or company purchasing securities for its own account. The dealer may then sell this from its account, therefore acting as a principal in the transaction.
Brokers are different from dealers. A broker’s main task is to carry out instructions given by a client. For example, a stock broker may buy a certain amount of a specific type of stock, but only after the purchase is approved by the client. He therefore serves as an intermediary between the investor and the stock market. Brokers receive commissions by engaging in such activities.
There are also broker/dealers. These individuals or firms take on the responsibilities of a broker and a dealer. They act on behalf of a brokerage firm and transact through the firm’s account. Armed with that responsibility, broker/dealers need to do due diligence in research and investigation of the kind of investment to be made, as well as find out about any risks involved in the investment.
To perform their function as brokers, broker/dealers determine the needs of their clients, and then manage the transactions that involve their client’s accounts. Therefore, broker/dealers are able to engage in a variety of financial activities, including the purchase and sale of securities.
