What is a broker-dealer?

A broker is any person engaged in the business of buying or selling securities for the account of others. A dealer is any 

person engaged in the business of buying or selling securities, but for their own account. Identifying when a person is 

acting as a broker or a dealer is important because generally broker-dealers must register with the SEC. 

Someone who trades securities for others could be a broker. In addition, other activities could require someone to 

register as a broker-dealer, including but not limited to:

Finding investors 

for companies or for 

funding rounds

Finding buyers 

and sellers 

of businesses

Operating a platform 

enabling trading 

of securities

Providing support 

services to registered 

broker-dealers

To determine whether someone is a broker, consider, for example, whether they: 

Participate in important parts 

of the transaction, like 

solicitation, negotiation, 

or execution

Receive commissions 

or compensation based 

on the outcome or 

size of the transaction 

Engage in the business of 

facilitating the buying and 

selling of securities

Handle securities or funds of 

others in connection with 

securities transactions

If so, they likely are acting as a broker and would have to register with the SEC. 

When do small businesses use a registered broker-dealer? 

Early-stage businesses may encounter challenges connecting with investors. Broker-dealers may be able to help bridge 

the gap between small businesses and potential investors. A person or firm may need to be registered as a broker-dealer 

if a company intends to pay them transaction-related compensation to help with transactions like the following:

Raise capital from investors Sell the company Engage in another type 

of liquidity transaction

If a company sells its own securities, would that make it a broker-dealer?

Issuer

A company issuing its own securities, sometimes called 

an issuer, generally is not acting as a broker because it 

is selling securities for its own account and not for the 

account of others. 

An issuer generally is not considered a dealer because 

it does not buy and sell its securities for its own account 

as part of its regular business. 

An issuer whose activities go beyond selling its 

securities, however, such as purchasing its securities 

from investors or effectively operating a market in its 

own securities, should consider whether it would need 

to register as a broker-dealer.

Associated Persons

Employees and other associated persons of an issuer 

may be exempt from registration as brokers for certain 

limited work selling the issuer’s securities. Sometimes 

called the “issuer’s exemption,” this exemption does 

not apply to the personnel of a company who routinely 

engage in the business of buying and selling securities 

for the company, especially if they are paid for selling 

these securities or have few other duties.

Employees and other associated persons of an issuer 

whose capital-raising activities go beyond selling the 

issuer’s securities, also should consider whether they 

would need to register as a broker-dealer.

What happens if a company uses an unregistered broker? 

A company or its personnel who do not comply with the requirements for broker-dealer registration and other securities 

laws could be subject to legal repercussions, including:

Civil or criminal lawsuit Rescission Future capital raising challenges

How do I find out if my broker-dealer is registered?

Brokers generally must register with the SEC and become members of the Financial Industry Regulatory Authority (FINRA)

Find out if your broker or investment professional is licensed and registered using this free search tool available on 

Investor.gov. Always check out both the person as well as the firm. You can also visit FINRA’s BrokerCheck program

and/or your state securities regulator

For more detail about the issuer’s exemption and associated persons of issuers, and to learn more about broker-dealer 

registration, including limited exemptions for certain activities, please review the Broker-Dealer Registration Guide.

Have suggestions on additional educational resources? Email smallbusiness@sec.gov.

Although this resource highlights certain provisions of the federal securities laws and SEC rules, it is not comprehensive. Brokers and dealers, and their 

associated persons, must comply with all applicable requirements, including those of the SEC, as well as the requirements of any self-regulatory 

organizations to which the brokers and dealers belong.

This resource represents the views of the staff of the Office of the Advocate for Small Business Capital Formation. It is not a rule, regulation, or statement 

of the Securities and Exchange Commission (“Commission”). The Commission has neither approved nor disapproved its content. This resource, like all 

staff statements, has no legal force or effect: it does not alter or amend applicable law, and it creates no new or additional obligations for any person. 

This resource does not provide legal advice. This resource was produced and disseminated at U.S. taxpayer expense.

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