Types of accounts in a brokerage firm

Opening an account in a brokerage firm is as easy as opening a bank account. Many brokerage firms only ask no more than a deposit. You are only asked to give basic information such as your job and social security number besides more specific information about your financial situation.

Brokers need to know very well their clients to be able to judge the type and negotiation amount they are able to bear and if clients will be able to use a loan to finance their negotiations.

Brokerage firms must ask their clients how will their stocks be registered. If they wish to leave their stock certificates in custody of the firm, for instance, stocks would be registered in the street name. Street name refers to the investors stock list registered under the brokerage firm name.

Dividends generated from these street name securities are sent by mail to the brokerage firm where they are accredited in the clients account. The most important disadvantage in logging stocks in the street name is that brokerage firms could not give all the mail concerning news and company reports. The advantage of having stocks in the street name is that when stocks are sold the client does not have the need to turn the signed stock certificates within the required 3 days before making the transaction.

Stocks are registered under its name and can be kept in security boxes from the brokerage firms or be sent to you by mail. You should keep the stock certificates in a banks safe taking into account they are negotiable valuables that if stolen may sold and you may lose a large amount of money.

There are three kinds of accounts that are used to buy or sell stocks:

• Cash
• Margin
• Discretionary