Brokerage companies
Brokerage firms are engaged in the sales and trading of securities. They deal with all types of securities and serve both individual and institutional clients. Investors looking to buy or sell individual securities must set up an account with a brokerage firm.

  1. Full service brokers - Provide extensive research and advice, and as a result, charge higher commissions.
  2. Discount brokers - Offer brokerage trading services at lower commission rates but provide no advice or recommendations.

Cash management
Brokerage firms compete directly with banks by offering to clients cash management tools, including money market mutual funds and credit cards.

Securities Investors Protection Corporation (SIPC)
A non-profit corporation created by Congress that insures the securities and cash in the customer accounts of member brokerage firms against the failure of those firms. Insures account holders up to a maximum of $500,000 for securities, $100,000 for cash or cash equivalents. The SIPC does not insure investors against market risks.

Insurance companies

The role of insurance
The primary role of insurance companies is to provide financial protection to policyholders against hazards that could cause significant financial loss. In return for premium payments from policyholders, insurance companies agree to reimburse them in the event of a loss. The insurer makes money by investing the premiums it receives.

Insurance will be reviewed in more detail later in this text, but below is a summary of the insurance industry.

Common forms of insurance
  • Life - Protects against the financial loss associated with the death of an individual, particularly the loss of income from a spouse or parent's death.
  • Property and casualty - A broad category of insurance that protects against loss of property, damage or other liabilities. Includes automobile, homeowners', workers' compensation and theft insurance.
  • Health insurance - Any insurance plan that covers medical expenses or health care services. Protects against loss from sickness or bodily injury. Includes disability income insurance.
Investment side of insurance
In addition to insuring against hazards, many insurance companies also sell investments or investment-like products. The most prevalent investment products offered by insurers are annuities and life insurance policies that also feature investment elements.

A number of insurance companies operate brokerage arms that trade securities on behalf of clients.

Insurance regulation
The insurance industry is regulated primarily by state insurance commissioners, though their broker-dealer subsidiaries are also regulated by the Securities and Exchange Commission, NASD and state securities administrators.


Mutual fund and Trust Companies

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