Financial Services Brokers

When a government wants to build a new sewer system or a company wants to build a new factory, it rarely has the required money—or capital—readily at hand to do it. It must first raise the capital from investors. Historically, raising capital to finance the needs of government and commerce was—and often still is—an arduous task. European monarchies, particularly during the 18th and 19th centuries, relied heavily on bankers to meet the costs of the interminable wars that devastated the continent and to assist in early industrial expansion. This system grew obsolete, however, and governments, banks, and industry turned to the burgeoning middle class for funds. They offered middle class investors securities and stocks—a fractional ownership in a company or enterprise—in exchange for their money. Soon, dealers emerged to link government and industry with the smaller investor. In the United States, the New York Stock Exchange was formed in 1792 and officially established in 1817.

The stock exchange functions as a marketplace where stockbrokers buy and sell securities for individuals or institutions. Stock prices can fluctuate from minute to minute, with the price of a stock at any given time determined by the demand for it. As a direct result of the disastrous stock market crash of 1929, the federal Securities Exchange Act of 1934 set up a federal commission to control the handling of securities and made illegal any manipulation of prices on stock exchanges. Today, the public is protected by regulations that set standards for stock listings, require public disclosure of the financial condition of companies offering stock, and prohibit stock manipulation and trading on inside information.

The deregulation of the financial services industry has allowed banks, brokerage firms, and insurance companies to provide more financial services—including investment advice and the buying and selling of stocks and other financial instruments—to the public, as well as to other investors. This has created many new opportunities for financial services brokers.