Registered Representative
A registered representative (RR) is a person who works for a client-facing financial firm such as a brokerage company and serves as a representative for clients who are trading investment products and securities. Registered representatives may be employed as brokers, financial advisors, or portfolio managers.Registered representatives must pass licensing tests and are regulated by the Financial Industry Regulatory Authority (FINRA) and the Securities and Exchange Commission (SEC). RRs must furthermore adhere to the suitability standard. An investment must meet the suitability requirements outlined in FINRA Rule 2111 prior to being recommended by a firm to an investor. The following question must be answered affirmatively: "Is this investment appropriate for my client?"
Registered Representative
Definition
A Registered Representative (RR) is an individual who works for a client-facing financial company, such as a brokerage firm, and represents clients trading investment products and securities. Registered Representatives can be employed as brokers, financial advisors, or portfolio managers.
Origin
The concept of a Registered Representative originated with the development of financial markets, particularly during the early 20th century as securities markets became more regulated. As the complexity of securities trading increased, investors needed professionals to assist them in making investment decisions, leading to the formation and development of the Registered Representative profession.
Categories and Characteristics
Registered Representatives can be categorized into the following types:
- Brokers: Primarily responsible for buying and selling securities, earning commissions.
- Financial Advisors: Provide comprehensive financial planning and investment advice, usually charging advisory fees.
- Portfolio Managers: Manage clients' investment portfolios, making asset allocation and investment decisions.
Characteristics of Registered Representatives include:
- Must pass licensing exams, such as Series 7 and Series 63.
- Regulated by the Financial Industry Regulatory Authority (FINRA) and the Securities and Exchange Commission (SEC).
- Must adhere to suitability standards, ensuring that recommended investments are appropriate for clients.
Specific Cases
Case 1: John is a Registered Representative whose client, Jane, wants to invest in the stock market. After understanding Jane's risk tolerance and investment goals, John recommends several stocks suitable for her and explains the risks and potential returns of each. Jane ultimately chooses two stocks to invest in and completes the transactions with John's assistance.
Case 2: Mark is a financial advisor whose client, Mike, wants to plan for retirement. Through detailed financial analysis, Mark helps Mike create a comprehensive retirement plan, including portfolio allocation and annual savings targets. Mike follows the plan and sees significant investment returns after a few years.
Common Questions
Question 1: What exams do Registered Representatives need to pass?
Answer: Registered Representatives typically need to pass the Series 7 and Series 63 exams.
Question 2: How do Registered Representatives ensure investments are suitable for clients?
Answer: Registered Representatives must adhere to FINRA's suitability standards, ensuring that recommended investments align with clients' financial situations, investment goals, and risk tolerance.
