Broker-Dealer

The definition turns on being in the business, and registration follows from it.

Exchange Act section 3(a)(4) defines a broker as 'any person engaged in the business of effecting transactions in securities for the account of others,' and section 3(a)(5) defines a dealer as a person in the business of buying and selling securities for its own account. Section 15(a) makes it unlawful for a broker or dealer to use interstate commerce to effect or induce securities transactions unless registered, and section 15(b)(8) requires membership in a registered securities association, which is FINRA.

Individuals sell as associated persons of a member firm. FINRA Rule 2040 bars a member from paying commissions to a person who is not registered as a broker-dealer but would have to be because of those payments and the related activity.

On a hypothetical $1,000,000 DST purchase, the selling compensation comes out of your equity before the trust buys anything.

One REIT's Form 10-K for 2025 describes the terms of its DST program: a commission of up to 5.0% and a dealer-manager fee of up to 1.5% of gross equity raised, which the dealer manager may re-allow to participating broker-dealers. The same filing says program costs are substantially funded by the DST investors.

Hypothetical, using those ceilings: on $1,000,000 of exchange equity, a 5% commission is $50,000 and a 1.5% dealer-manager fee is $15,000, so $65,000 pays for distribution. The full stack is covered under offering load; run your own numbers with your CPA.

Regulation Best Interest requires the firm, before or at the recommendation, to disclose in writing that it is acting as a broker-dealer, the material fees and costs that apply, and the material conflicts of interest tied to the recommendation.

It bites in diligence and accountability: the broker-dealer is the party regulators expect to investigate the offering.

FINRA Regulatory Notice 23-08 says a member recommending a private placement should, at a minimum, reasonably investigate the issuer and management, business prospects, assets, claims made and intended use of proceeds. Form D Item 12 lists each sales compensation recipient by CRD number, so you can match the firm on the filing to the firm in your inbox.

BrokerCheck shows a representative's registration history, ten years of employment history, current licenses and disclosures of customer disputes and disciplinary events. Compare that with an adviser's role at advisor fees and conflicts for DSTs and is a DST a security and who can sell it.