How a broker is regulated
Direct Path Brokers is a fictitious broker-dealer in a demonstration. A real one is registered with the SEC, is a member of FINRA and SIPC, and owes its customers and regulators the duties below. This page sets out the method and how the demo maps to it.
Opening and knowing the account
| Duty | What it requires | In this demo |
|---|---|---|
| Customer identification (AML/CIP) | Verify identity (name, date of birth, address, taxpayer number) at account opening; an anti-money-laundering program (FINRA 3310); suspicious activity reports. | Shown as a step and skipped: a demo never collects identity numbers. |
| Know your customer, suitability, Reg BI | Know the essential facts about each customer (FINRA 2090), recommend only what suits them (2111, Regulation Best Interest), deliver Form CRS. | Account opening asks the questions and records the answers; Form CRS is acknowledged. |
| Trusted contact | Ask for a trusted contact person (FINRA 4512). | Not collected (it is someone else's data). |
| Secure access | Protect customer accounts and information (Regulation S-P). | Two-step login with an authenticator app or text codes. |
Handling orders
| Duty | What it requires | In this demo |
|---|---|---|
| Best execution | Seek the most favorable terms for each order, with a regular and rigorous review of where orders go (FINRA 5310). | Calls and On-Demand orders go to the Demand Call Market; standard (market and limit) orders to a wholesaler, at or better than the quote. |
| Rule 606 and 607 | A quarterly public report of where held orders were routed and any payment for order flow; routing details to a customer on request; the payment-for-order-flow policy at account opening and yearly. | The routing is recorded with every order; the quarterly 606 report (the SEC's XML layout) is generated each evening, quarter to date. |
| Consolidated Audit Trail | Report every order event by 8:00 am ET the next trading day; clocks within 50 milliseconds. | Every order and fill is time-stamped; the CAT order events (new order, route, cancel) are written each evening. |
| Regulation SHO | Mark sells long or short, locate shares before a short sale, close out fails. | Sells are long only for now; short selling with a locate is planned for margin accounts. |
| Trade reporting | Trades made away from an exchange are reported to a FINRA trade reporting facility within 10 seconds. | The wholesaler's fills would be reported this way. |
Money, records and reports
| Duty | What it requires | In this demo |
|---|---|---|
| Net capital | Keep minimum liquid capital (Rule 15c3-1; $250,000 for a firm that carries customer accounts). | Not modeled. |
| Customer protection | Keep customers' securities and a reserve of their cash apart from the firm's (Rule 15c3-3; weekly reserve computation, daily for the largest firms since June 30, 2026). | Customer cash is tracked settled and unsettled. |
| Settlement | Trades settle the next business day (T+1, Rule 15c6-1). | Balances show unsettled sales until the next business day. |
| Books and records | Blotters, ledgers, order tickets, account records (Rules 17a-3, 17a-4), kept for 3 to 6 years. | Every order, fill, fee and transfer is kept and shown under Activity; the blotter and order memoranda are written each evening. |
| Financial reports | FOCUS reports monthly or quarterly, an audited annual report (Rule 17a-5). | Not modeled. |
| Statements and SIPC | Account statements at least quarterly (FINRA 2231); SIPC membership and its notice to customers. | A statement (month to date) and trade confirmations (Rule 10b-10) are written for each customer each evening. |
Your documents and the end-of-day files
Each weekday evening the demo writes the files a broker keeps and sends: your trade confirmations (Rule 10b-10) and statement (FINRA Rule 2231), and the firm's blotter and order memoranda (Rule 17a-3), CAT order events, the trade file for its clearing firm and the Rule 606 routing report. None is filed with anyone.
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Nothing here is filed with anyone; the money is not real and no order leaves the demo's own servers. The exchange's side of the method is on the Demand Call Market.
Sources: FINRA Rules 2090, 2111, 2231, 3310, 4512, 5310 and the 6800 series; SEC Regulation Best Interest and Form CRS, Rules 606 and 607, Regulation SHO, Rules 15c3-1, 15c3-3, 15c6-1, 17a-3, 17a-4, 17a-5; Regulation S-P. Summarized November 2, 2026; check the rule text before relying on it.