Brokerage Contract Template for the United States

A Brokerage Contract is a legally binding agreement that governs the relationship between you and a securities broker-dealer in the United States. This document establishes the terms under which your broker will execute trades, manage your account, and provide investment services while ensuring compliance with federal securities laws and regulatory requirements.

When do you need this document?

You need a Brokerage Contract whenever you open a securities trading account with a broker-dealer. This includes establishing relationships for stock trading, bond transactions, mutual fund investments, or options trading. Investment advisors who also execute trades require this contract to comply with dual registration requirements under both the Investment Advisers Act and Securities Exchange Act. Institutional clients, hedge funds, and pension plans also need specialized brokerage agreements that address their unique trading volumes and regulatory requirements. Additionally, if you're switching brokers or updating your existing relationship to include new services like margin trading or options, you'll need an updated contract.

Key legal considerations

Your Brokerage Contract must include comprehensive risk disclosures as mandated by federal securities laws, particularly regarding market volatility, liquidity risks, and potential losses. The agreement should clearly define the scope of services, whether limited to execution-only trades or including investment advice, as this determines applicable regulatory frameworks. Commission structures and fee schedules must be transparent and comply with FINRA's fair pricing requirements. The contract should specify your trading authorization level, including whether the broker has discretionary authority to make trades on your behalf. Margin trading provisions, if applicable, must include detailed disclosures about interest rates, margin calls, and the broker's right to liquidate positions. Additionally, the agreement must address how disputes will be resolved, typically through mandatory arbitration under FINRA or other approved forums.

Legal requirements in United States

Under the Securities Exchange Act of 1934, all broker-dealers must register with the SEC and maintain membership in a self-regulatory organization like FINRA. Your contract must comply with FINRA Rule 2090 (Know Your Customer) and Rule 2111 (Suitability), requiring brokers to understand your financial situation and investment objectives. The agreement must include specific disclosures required by the Securities Act of 1933 for any new securities offerings. State Blue Sky Laws may impose additional requirements, particularly for smaller or regional broker-dealers. The contract must address anti-money laundering (AML) compliance under the Bank Secrecy Act and include customer identification procedures. If your broker provides investment advice, additional disclosures under the Investment Advisers Act of 1940 are required, including potential conflicts of interest and fee structures. The agreement must also comply with Regulation Best Interest, ensuring your broker acts in your best interest when making investment recommendations.