What is brokerage

As you know all activities on the securities market, carried out professionally, involves several activities. These include broker / dealer activities; activities involving securities management; clearing; Depository activities; maintaining the register of owners of securities; organizing trading in securities on the market and some other activities. Let us dwell on the notion of brokerage.

The Brokerage business – activities on conclusion of legal transactions. Objects of the deals be securities, and engaged in brokerage activity, the person acts as a middleman or agent and acts on the basis of the Commission agreement or order. Besides brokering, and more specifically its implementation requires power of attorney for such transactions, if the contract is not an indication of the powers of the Commissioner or attorney.

Broker – is a member of the securities market, which is engaged in brokerage activities.

Today brokerage – in most cases the prerogative of commercial organizations created in the form of a limited liability or joint-stock companies. In our country this activity are also public institutions. In particular, provides brokerage services to the savings Bank of Russia transactions with securities on behalf and at the expense of customers.

For the legitimate exercise of brokering activities require a license confirming the right of the participant of the securities market to engage in professional transactions.

The distinctive features that characterized  brokerage activity in comparison with the other types of professional activities on the securities market is the fact that brokers can make deals of purecoverage, but only in that case  if this stipulated in the contract. Also purecoverage possible in those cases when a broker leads to this because of the circumstances and if otherwise it is impossible to protect the interests of the client. The client in the last case notified about the intention of the broker to make a deal purecoverage.

The duties of a broker is bona fide execution of client orders in the order they are received. The main responsibilities of the broker include:

1.  Obligation to communicate to customers the knowledge of all the necessary data related to the execution of the order and fulfillment of obligations stipulated in the contract of purchase and sale of securities. For example, the broker has no right not to recommend the transaction to the client if the latter has not received full information about the risks associated with it;

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2. Safeguarding and accounting of client's securities. This is done in the time specified  by the Treaty. In addition to the broker's duty to go presentation to a client reports on the implementation of the terms of the agreement, and a statement showing the movement of securities and cash account to the customer's accounts;

3. The adoption of measures to ensure the confidentiality of customer data, in particular name, payment details and other information that was obtained due to the execution of obligations under the customer agreement.

The stock market may be accompanied by situations in which between the broker and the customer starts a conflict of interest. In such cases, the broker must notify the client about any interest. If this obligation is ignored by the broker and the client as a result will incur a loss, the latter will have every reason to demand from the broker for damages. Reimbursement shall be made in the order which  provides civil law.