Broker-Dealer Compensation Methods

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Chapters in this video

  1. 0:00 Agent vs. principal: the two hats
  2. 1:37 One trade, one capacity: no double dipping
  3. 2:17 Commissions and separate disclosure
  4. 3:31 Markups embedded in price
  5. 4:58 Markdown is not a discount
  6. 5:25 Non-transaction fees and reasonableness
  7. 6:02 Rapid-fire exam recap

What this video covers

  • How capacity (agent vs. principal) dictates compensation type and disclosure method on every trade
  • Why a broker-dealer cannot charge both a commission and a markup on the same transaction
  • How commissions work in agency transactions: market price plus commission on buys, market price minus commission on sells
  • Why commissions are separately disclosed on trade confirmations while markups and markdowns are embedded in price
  • What markups and markdowns actually represent when a broker-dealer acts as principal, and why a markdown is not a discount
  • Which non-transaction fees are permitted and why unreasonable fees trigger state administrator action as a dishonest business practice
  • How fee-based accounts change broker incentives compared to per-transaction commission structures

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