Most securities firms function as both a broker and dealer, so they are referred to as broker-dealers.
A broker is any person engaged in the business of effecting transactions in securities for the account of others in exchange for a fee or commission (see Section 3(a)(4)(A) of the Exchange Act). A broker acts as an agent only for someone else, buying or selling securities on a securities exchange for a commission.
A dealer is any person regularly engaged in the business of buying or selling securities, either for his own account or for the accounts of others (see Section 2(a)(12) of the Securities Act and Section 3(a)(5)(A) of the Exchange Act). Unlike a broker, who only acts as an agent for a customer in exchange for a commission, a dealer may also act as a principal by dealing in securities for his own inventory as part of his regular business.
Broker-dealers are subject to regulatory oversight by the SEC and must also register with a self-regulatory organization. Broker-dealers may also be subject to state regulation.
Related terms

Practical Law Dictionary. Glossary of UK, US and international legal terms. . 2010.

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