3. The Role of the Broker Dealer.

In a previous column we explained that all investors wishing to trade on the Eastern Caribbean Securities Exchange must do so through licensed market intermediaries, called brokers dealers and broker. This week we will look at the role of the broker dealer.

Broker dealers are financial intermediaries that provide a wide range of financial and investment services to investors including the execution of trades, advice on which securities to buy or sell, as well as on financial planning. A broker dealer can help you to understand and make future investment decisions with greater confidence. A broker, on the other hand is only authorized to buy and sell securities as instructed by their clients. Seasoned investors may therefore prefer to use the services of the broker, while new investors can benefit from the experience and knowledge of the broker dealers.

Let us explore the role of a broker dealer in the context of the Eastern Caribbean Securities Market.

All financial intermediaries operating in the Eastern Caribbean Securities Market must be licensed by the Eastern Caribbean Securities Regulatory Commission, (ECSRC) which has been designated as the authority responsible for licensing all intermediary firms doing business in the Eastern Caribbean Securities Market under the Securities Ac 2001. the financial professionals, that is the principals and representatives of the firms, must also be licensed, completing ECSRC certification workshops and examinations, as well as training by the ECSE in the use of the software systems that drive the operations of both the primary and secondary markets.

One of the functions of the broker dealer is to provide personal service and quality advice to the clients. The broker dealer will need to clearly understand your financial needs and your investment objectives in order to provide appropriate financial advice or recommend the products best suited to your needs. You will need to answer questions pertaining to your financial status, investment objectives, and your ability to incur risk. Expect questions such as: What level of savings do you currently have? What types of investments do you currently own? What other assets do you own, for example, a car, a house, land? What is your average monthly income and what expenses do you have? Why do you want to invest – for retirement, to purchase a home or to save for college?

In order to trade on the ECSE, you will need to establish an account with the broker dealer, who will trade on your behalf. You will need to provide a photo ID, and complete the required forms.

Broker dealers work on a commission basis, with commissions and fees charged varying from one broker dealer to another, in accordance with the level of services provided, the value of the client’s assets under management, and the fee structure of each broker dealer. However, regulations have capped commissions at 5% of the value of the total investment that investors would have authorized the broker dealer to trade on their behalf.

A good broker dealer will seek out good returns for your investments, of course while observing a prudent approach to financial planning and providing you with appropriate investment strategies. Persons who are qualified to invest on their own, without the support of expert advice, can contact a broker, who will execute the trade as per their instructions. But do you have the confidence to risk your future on what you know about investing? If your answer is no, then you need the services of a broker dealer.

Clearly your choice of broker dealer is critical. Before making your choice, shop around. Asks questions. Speak to persons who may have had experiences with one or more broker dealers and listen to their reviews. Visit several broker dealer firms. Evaluate their rate schedules, as well as their ability to provide you with the services you need. Having chosen a broker dealer, make sure that you receive regular statements detailing your investments. On average, did they increase in value or were there significant losses? Answers to these questions would indicate whether you have selected a broker dealer that is ideal for you or if you should look for another broker dealer to take care of your investments.

And if you have selected a broker who you believe has reneged on his obligation to you as a client then you have recourse to the regulatory authority, which is the Eastern Caribbean Securities Commission.

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