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Brokerage Houses

Patricia

By: Andrea Mendoza Molina

Brokerage Houses are "corporations dedicated to securities intermediation, which involves bringing together bidders and offerors of securities, as well as offering and trading securities on their own or on behalf of third parties in the primary or secondary market"1 . In other words, are authorized companies that operate in the securities market whose main purpose is to assist investors in the purchase and sale of securities.

The main activities of brokerage houses are to provide advice to companies to obtain financing through the issuance of securities, and to participate in public offerings as a placement agent or as representatives of security holders.

Another of the activities of brokerage houses is to carry out securities purchase and sale transactions, repurchase agreements and securities lending, on their own or on behalf of their clients.

Furthermore, they may offer investment services, i.e., advisory and non-advisory services to assist clients in making investment decisions.

Brokerage houses may also act as trustees, administrators and executors of securities pledges, as well as distributors of investment company shares.

Persons wishing to participate as shareholders of a brokerage house must obtain authorization from the National Banking and Securities Commission (Comisión Nacional Bancaria y de Valores or “CNBV”) by filing an application before the Commission. The application must be made by means of a written request for authorization for the organization and operation of a brokerage house, which must be in free form and must contain the following information:

a) Draft bylaws of a corporation.

b) List and information of the partners, indicating the amount of capital stock to be subscribed and the origin of the resources, as well as the possible board members, general director and main executives of the company.

c) General plan of operation of the company that includes, at least, the following:

  • The activities and services to be performed.
  • Security measures to be used to preserve the integrity of the information.
  • Geographic coverage forecasts, indicating the regions and places in which it intends to operate.
  • Financial feasibility study of the company.
  • Basis for its organization and internal control.
  • Basis for the distribution of profits, considering that no dividends may be distributed during the first 3 fiscal years, and net profits must be allocated to capital reserves.

d) Code of conduct.

e) Proof of bank deposit for an amount equal to 10% of the minimum capital required for the company’s operation.

f) Original or certified copy of the notarial deed stating the powers of the legal representatives or attorneys who sign the authorization request, if applicable.

g) Permit from the Ministry of Economy (Secretaría de Economía) to use the proposed name or, if applicable, a copy of the application submitted before the Ministry.

Once authorization is obtained, brokerage houses operating on behalf of the investing public must comply with various obligations established by law.

1https://www.cnbv.gob.mx/SECTORES-SUPERVISADOS/BURS%C3%81TIL/Descripci%C3%B3n/Paginas/Casas-de-Bolsa.aspx

Source:

https://www.bancomext.com/glosario/casa-de-bolsa#:~:text=Entidad%20financiera%20privada%20autorizada%20para,%2C%20valores%2C%20acciones%2C%20etc.https://www.cnbv.gob.mx/SECTORES-SUPERVISADOS/BURS%C3%81TIL/Descripci%C3%B3n/Paginas/Casas-de-Bolsa.aspx

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