Definition
A Registered Representative (RR) is an individual authorized to sell securities to the public for a brokerage firm. They are also known as financial advisors, brokers, or investment representatives.
Meaning
Registered representatives play a critical role in guiding clients through investment opportunities, helping them buy and sell stocks, bonds, mutual funds, and other securities. They are responsible for managing client portfolios, offering advice, and ensuring compliance with financial regulatory authorities.
Etymology
The term “registered” denotes that the individual has met specific legal standards and qualifications, while “representative” highlights the role of advocating and conducting transactions on behalf of clients.
Background
Becoming a registered representative requires passing a series of exams governed by the Financial Industry Regulatory Authority (FINRA) and other state regulations. Most importantly, the Series 7 and Series 63 or Series 66 exams must be passed. They serve various functions from assessing the suitability of investments to ensuring ethical conduct in trading.
Key Takeaways
- Role: Registered representatives are crucial in advising clients on securities investments.
- Qualifications: They must pass specific exams and meet regulatory requirements.
- Responsibilities: They build and manage investment portfolios and ensure compliance.
- Regulation: Governed by FINRA and other state and federal bodies.
Differences and Similarities
Differences
- Financial Advisor vs. Registered Representative: All registered representatives are financial advisors, but not all financial advisors are registered representatives. Financial advisors may provide comprehensive financial planning without selling securities.
- Broker vs. Investment Advisor: Brokers typically earn commissions from transactions; investment advisors usually charge fees for advisory services.
Similarities
- Both offer financial advice and investment management.
- Both are regulated to ensure they act in the best interest of clients.
Synonyms
- Financial Advisor
- Broker
- Investment Representative
- Stockbroker
Antonyms
- Unregistered Practitioner
- Amateur Trader
Related Terms
- Series 7 Exam: A licensing exam for registered representatives.
- Series 63 Exam: A test focusing on state laws and regulations.
- FINRA: The Financial Industry Regulatory Authority overseeing registered representatives.
Frequently Asked Questions
What educational background is required to be a registered representative?
A college degree in finance, economics, or a related field is common though not always required. What is essential is passing the requisite FINRA exams.
Do registered representatives only sell securities?
No, they also provide investment advice, manage portfolios, and ensure compliance with financial regulations.
How do registered representatives earn a salary?
They often earn through commissions on the securities they sell or through fees based on assets under management.
Are registered representatives required to adhere to a code of ethics?
Yes, they must comply with strict ethical guidelines to ensure transparency, honesty, and the best interest of their clients.
Exciting Facts
- Registered representatives are integral to the functioning of Wall Street and other financial markets globally.
- The Series 7 exam contains over 200 multiple-choice questions, covering a wide range of financial topics.
- The average pass rate for the Series 7 exam hovers around 65-75%.
Quotations
“The stock market is filled with individuals who know the price of everything, but the value of nothing.” — Philip Fisher
Proverbs and Idioms
- “You’ve got to spend money to make money”: Often applied when discussing investment risks and returns.
- “Don’t put all your eggs in one basket”: A popular idiom emphasizing the importance of diversification in investments.
Related Government Regulations
- Securities Exchange Act of 1934
- Investment Advisers Act of 1940
- Financial Industry Regulatory Authority (FINRA) regulations
Literature and Other Sources for Further Studies
- “Common Stocks and Uncommon Profits” by Philip Fisher
- FINRA Regulatory Notices and Guidelines
- “The Intelligent Investor” by Benjamin Graham
Reference:
Author: Jameson Bright
Date: October 3, 2023
“In Diversity there is Beauty and Strength. - Maya Angelou”
