Who is a Stockbroker?
A stockbroker is a firm that acts as an intermediary for stock market transactions, offering investors a variety of services in addition to investment advice and executing buy/ sell orders of investors. The Stockbroker's fee is the brokerage.
There are 15 Member Firms and 12 Trading Members at the Colombo Stock Exchange (CSE). They are governed by the regulations set out by the CSE and licensed by the Securities and Exchange Commission (SEC). It is mandatory for you to obtain the services of a stockbroker when transacting in the secondary market.
What services do they provide?
Intermediation
1. Investment advice
Execute and confirm buy / sell transactions
Settlement of transactions - T+3 for Equities and Delivery vs Payment (DVP) for Corporate and Government debt
Follow-up on defaulters and Portfolio Management
2. Research
Most brokers have a research unit that studies the market in general and specific companies in particular. With this research they are able to recommend shares for you to purchase. They publish research in the form of
- Sector reports
- Daily & Weekly reports
- Company specific reports
- Daily valuation reports
The broker makes recommendations to the best of his ability and should not be liable in case the recommendation is found to be incorrect.
3. Margin Trading
Broker Firms could provide this service, to its clients, subject to a registration to be obtained from SEC.
4. Corporate Finance Activities
Advise and facilitate takeovers and mergers
Sponsoring listing applications for companies.
Client Registration & documentation
- Opening of Securities Accounts
- Deposit of Securities
- Withdrawal of Securities
- Transfer of Securities
- Provision of Contract Notes
- Settlement of transactions
Providing information
- Assistance and information dissemination with regard to new issues
Qualities of an Investment Advisor
The Stockbroker should act in the client's best interest. Therefore, he should possess the following qualities.
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