In addition, dealers' responsibilities under the anti-fraud provisions of the securities laws would continue to apply to both individual investors as well as institutions, said Ms. LaRoche. We believe firmly in the full enforcement of the anti-fraud provisions of the securities statutes as they apply to both individual and institutional investors. Dealers Are Not Investment Advisors Ms. LaRoche observed that the responsibilities and obligations of a dealer are frequently misunderstood. In many instances, dealers are confused with investment advisors and that has resulted in a perception that dealers are responsible for clients' decisions. The function of a dealer is one of a financial intermediary between and among users of capital and investors.
Dealers provide liquidity and market access.
On principal transactions, the dealer is compensated by putting up capital and taking market risks as a counterparty. By contrast, investment advisors provide advice to clients on investment goals and strategies, make buy and sell recommendations, and assume a fiduciary duty to clients. An advisor is compensated for providing advice, not liquidity or market access. Dealer Obligations PSA said dealers should remain appropriately bound by legal obligations in facilitating transactions. These include a clear and complete description of the securities being sold, the price of the instrument, the disclosure of any known characteristics of the security that could affect pricing, and an effort to ensure investor understanding of how the instrument could affect the client's financial situation.