What is brokerage?
As you know, all activities on the securities marketsecurities, carried out professionally, includes several types of activities. These include brokerage and dealer activities; activities that involve the management of securities; clearing; depositary activity; maintaining a register of securities owners; organization of trading in securities on the market and some other activities. Let us dwell in more detail on such a concept as brokerage activity.
Brokerage is the activity offulfillment of civil law transactions. Objects of transactions are securities, and the person performing brokerage activity acts as a commission agent or attorney, and acts on the basis of a commission or commission agreement. In addition, brokerage, or rather its implementation, requires a power of attorney to carry out such transactions, if the contract lacks an indication of the powers of the commission agent or attorney.
A broker is a participant in the securities market, which deals with brokering activities.
To date, brokerage activities arein most cases, the prerogative of commercial organizations created in the form of a limited liability company or a joint-stock company. In our country, this type of activity is also carried out by state institutions. In particular, brokerage services are provided by the Savings Bank of Russia, performing transactions with securities on behalf of and at the expense of customers.
For the legal implementation of brokerage activities, a license is required to confirm the right of a participant in the securities market to professionally deal with transactions.
To the distinctive features thatcharacterized by brokerage activities in comparison with other types of professional activities carried out in the securities market is the fact that brokers can perform transactions of reassignment, but only if such is stipulated in the contract. Also, the transfer is possible in cases where the broker forces this to force of circumstances and if otherwise it is impossible to protect the interests of the client. The client in the latter case is necessarily notified of the intention of the broker to perform the transaction of the transfer.
The duties of the broker include conscientious execution of orders of customers in the order they are received. The main duties of the broker also include:
1. The obligation to inform the clients of all the necessary data related to the execution of instructions of the latter and the fulfillment of obligations stipulated by the contract of purchase and sale of securities. For example, a broker does not have the right not to recommend a deal to a client if the broker does not receive complete information about the risks associated with it;
2. Securing and keeping records of the client's securities. This is done at the time specified by the contract. In addition, the broker shall be obligated to provide reports to the client on the progress of the terms of the contract, as well as extracts indicating the movement of securities and cash on the client's client accounts;
3. Take measures to ensure the confidentiality of customer data, in particular its name, payment details, as well as other information that was received due to the fulfillment of obligations stipulated by the contract with the client.
Work on the stock market can be accompanied bysituations, when a conflict of interests begins between the broker and the client. In such cases, the broker is obliged to notify the client about the interest that has arisen. In the event that this duty is ignored by the broker, and the client therefore incurs losses, the latter will have every reason to demand damages from the broker. Reimbursement is carried out in accordance with the procedure provided for by civil law.
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