Legal Definitions - stockbroker

A stockbroker is a licensed financial professional who buys and sells stocks and other investment securities on behalf of clients. They act as an intermediary, executing trades in the market based on their clients' instructions or investment strategies.

Here are some examples to illustrate the role of a stockbroker:

• Individual Investor's Portfolio: Imagine Maria, who has saved up some money and wants to invest in shares of a well-known technology company. Instead of trying to navigate the complex stock market herself, she contacts a stockbroker. Maria instructs the stockbroker to purchase 100 shares of the technology company's stock. The stockbroker then executes this order on her behalf, ensuring the shares are bought and placed into Maria's investment account.

  This illustrates the term because the stockbroker is acting as Maria's agent, performing the buying transaction in the market exactly as she instructed.

• Managing a Trust Fund: Consider a situation where a trustee is responsible for managing a trust fund established for a minor beneficiary. The trust holds various assets, including stocks. To ensure the trust's investments align with its long-term goals, the trustee decides to sell some underperforming energy stocks and buy shares in a growing renewable energy fund. The trustee would instruct a stockbroker to carry out these specific buy and sell orders for the trust's portfolio.

  Here, the stockbroker is acting as an agent for the trust (represented by the trustee), executing trades to manage the trust's assets according to its investment mandate.

• Company Employee Stock Options: Sarah works for a publicly traded company and has exercised her employee stock options, meaning she now owns shares of her company's stock. She decides she wants to sell a portion of these shares to fund a down payment on a house. She contacts a stockbroker associated with her company's employee stock plan or her personal investment firm. She instructs the stockbroker to sell a specific number of her company's shares.

  This example shows the stockbroker acting as Sarah's agent to liquidate her stock holdings, facilitating the sale of her shares in the market on her behalf.