Investment broker

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Investment brokers are individuals who bring together buyers and sellers of investments.[1] They usually are required to be licensed to act on behalf of buyers and sellers of stock. They charge a commission on trades that they execute on such instructions from buyers and sellers.

Types of investment brokers[edit]

Main points in activity[edit]

  • Brokerage activity is carried out by a broker who is a professional securities market participant.
  • Rights and duties of a broker and his client shall be stipulated in the agreement on brokerage services and in the instructions given to the broker by the client in accordance with this agreement.
  • Mandatory requirements to the agreement on brokerage services shall be set by the National Commission.
  • Brokers shall transfer the power of attorney for carrying out transactions only to brokers. The transfer is allowed if it is stipulated in the brokerage services agreement or in cases when a broker is forced to do so in order to protect the interests of his client with the notification of the latter.
  • Transfer of power of attorney shall be carried out in compliance with legislation.
  • The broker shall execute clients' instructions in good faith and on terms favorable for the client and in the order in which they were received, unless the agreement with the client or his instruction envisions otherwise.
  • Security transactions executed by the broker upon the clients' instruction should be executed with priority over the dealer transactions of the broker, in case these two types of activity are combined, or over transactions executed by the broker upon instruction of its affiliated persons.
  • In the event that the broker has an interest which prevents him from executing the client's instruction on the terms most beneficial for the client, the broker shall immediately notify the latter of such an interest.
  • In the event that a conflict of interests between the broker and his client, of which the client was not notified before the broker received the respective instruction, led to execution of the instruction to the detriment of the client's interests, the broker is obliged to compensate for the losses from his own account as set forth in civil legislation.
  • The broker shall compensate in full for the losses incurred by a client as a result of non-execution or improper execution by the broker of his obligations under the agreement on brokerage services.
  • In the event that the broker is deemed insolvent (bankrupt), the property that he holds under agreements on brokerage services and which belongs to his clients shall not be included in tender stock.

Main functions[edit]

  • An intermediary between seller and buyer
  • To make transactions on behalf of and paid by the client or on his behalf and at the expense of the client
  • To inform and consult the client, especially about risks
  • To insure client's operations
  • Infrastructural support of operations with securities

Types of orders[edit]

  • Limit order - instructs your broker to buy or sell only the stock is at the price you have named, or better.
  • Stop-loss orders are similar to limit orders in that the trade is not to be executed unless the stock hits a price limit. In this case, however, the stock is to be sold if its price falls below a stipulated level. As the name suggest the order lets the stock be sold to stop further losses from accumulating. Symmetrically, stop-buy orders specify that the stock should not be bought when its price rises above given limit.


  1. ^ All About Investing, Esme Faerber, ISBN 0-07-145752-6