Be
careful that some of the brokerage transactions you make are
simple. In many instances, the broker may be
acting as a principal, selling you a security from his inventory, or
perhaps buying the security into his inventory.
That
could represent a very short period, an in-and-out
transaction with another party. Nevertheless, the broker is
technically not a broker but a dealer.
That
is legal provided his markup is reasonable. In many instances a 5%
markup is not acceptable when the security is traded in a liquid
market.
The
Financial Industry Regulatory Authority or FINRA has been attempting
to fine tune the activity. (See the Earl J. Weinreb NewsHole®
comments and @BusinessNewshole tweets.)
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