Market Participants

Retail

Also known as individual investors, individuals who buy and sell public debt and equity securities through their retirement or brokerage accounts. They invest using their own money for their own personal goals such as retirement or saving up for a house. The SEC considers retail investors to be unsophisticated and, as a result, most securities regulations are targeted at keeping this particular class of investors protected.

Accredited

can be an individual or an entity. They must meet certain requirements related to their net worth, income, qualifications, experience, or certifications in order to be considered accredited. Once they reach this status, they are permitted to trade in private securities not registered with the SEC, including private placements and venture capital.

Individuals are considered to be accredited if

• Any natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that person’s spouse or spousal equivalent in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year.

• Any natural person whose individual net worth, or joint net worth with that person’s spouse or spousal equivalent, exceeds $1,000,000.

Institutional

Unlike retail and accredited investors, these investors can only be legal entities, such as real estate investment trusts, venture capital funds, insurance companies, credit unions, banks, pension funds, hedge funds, and mutual funds. These investors trade in securities on behalf of their clients or shareholders and they buy and sell in large quantities.

broker

is an entity that trades in securities on behalf of its clients

dealer or principal

trades on behalf of itself

Clearing

hold customer accounts and are responsible for clearing trades and ensuring those trades reach settlement.

Introducing

do not hold client funds nor do they execute transactions.

Prime Brokers

are unique in that they only service large financial institutions as a way for those institutions to outsource certain activities, such as trade clearing and settlement or risk and performance analysis.

investment adviser

an be an individual or a company. They are paid by their clients to provide advice about securities investments, manage investment portfolios, or to provide other financial planning or brokerage services. Other common names for investment advisers include portfolio managers, wealth managers, or asset managers. Morgan Stanley Wealth Management is an example of an investment adviser. Individuals who work on behalf of the firm are known as

municipal advisors

are required to register with both the SEC and the MSRB. Section 15B of the Securities Exchange Act defines _____ as a person that:

• Provides advice to or on behalf of a municipal entity or obligated person with respect to municipal financial products or the issuance of municipal securities, including advice with respect to the structure, timing, terms, and other similar matters concerning such financial products or issues; or

Issuers

are legal entities that fund their operations by selling securities (such as common stock) to investors.

Underwriters

facilitate the sale and distribution of an issuer’s securities by pricing the securities, purchasing the securities directly from the issuer, and then finally selling the securities to investors.

Market Makers

will buy or sell securities of a defined set of companies to broker dealers who are members of the exchange.

trustee

is an individual, broker, bank, or other similar organization charged with governing a trust. They manage and administer investments or other assets on behalf of the beneficiary of the trust and generally have a fiduciary responsibility to the trust.

custodian

is the entity (typically a bank or brokerage firm) that actually holds the assets for safekeeping.

transfer agents

act as intermediaries between securities issuers and securities holders. They are primarily responsible for maintaining security holder records and distributing dividends on behalf of the issuing company.

Depository Trust & Clearing Corporation (DTCC)

manages the daily clearing and settlement processes for most securities transactions in the United States. A good way of thinking about this is that when you write a check, it is not ‘good’ until it ‘clears.’ Similarly in the stock market, your purchase isn’t ‘good’ until it clears through