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One of the myths we often hear is that Vested acts purely as a UI wrapper/tech platform on top of foreign brokers. We wrote this article to help explain why this is not true and, in the process, explain the world of licensed US Broker Dealers. We also compare the US market structure to the India structure for ease of understanding.
When you invest in US stocks through Vested, your trades are cleared and your securities are held in custody by DriveWealth, a US-based clearing and custody firm. This is a fairly common setup in the American financial industry, and it often prompts a reasonable question: if DriveWealth handles the back-end, what exactly does Vested do?
The answer has a lot to do with how the US brokerage system is structured — and understanding that structure helps explain the responsibilities Vested has taken on as a licensed broker-dealer.
How the US Brokerage System Is Structured
The US financial industry deliberately separates two types of broker-dealers: introducing brokers and clearing/carrying brokers. This structure goes back decades and is built to distribute responsibilities across specialized entities.
Clearing brokers (like DriveWealth, Apex Clearing, or Wedbush) handle the operational back-end: holding securities in custody, settling trades, maintaining account records, and managing the mechanics of moving shares and money. Think of them as the financial infrastructure similar to how Visa or SWIFT power payment rails that banks and fintechs build on top of.
Introducing brokers are the firms that face the customer directly. They take on responsibility for everything that touches the investor: onboarding, identity verification, compliance, customer service, investment guidance, and maintaining appropriate books and records.
This division of labor reflects a practical reality. Building clearing infrastructure requires massive capital reserves and years of regulatory build-out. The introducing broker model allows customer-focused, regulated firms to serve investors efficiently — while still operating under the full weight of US securities law.
Comparing this structure to the India markets structure
The US model maps directly to how the Indian market works.
Indian brokers are SEBI-registered stock brokers that own the customer relationship: KYC, suitability, and accountability. Most are also registered as Depository Participants (DPs), giving them a regulated interface into CDSL or NSDL, but that doesn’t make them the depository; CDSL and NSDL remain the central infrastructure that holds the ownership records.
For clearing, Indian brokers have a choice: larger ones register as a Self-Clearing Member to clear themselves and those without clearing membership outsource settlement to a Professional Clearing Member (PCM), typically a bank or custodian, that takes on that responsibility on their behalf. For example, Zerodha only moved to self-clearing for its F&O business in 2019; before that, they utilised IL&FS’s clearing services.
Now, comparing this to our structure at Vested. Vested (through our registered entity VF Securities Inc.) is the FINRA-registered broker-dealer that owns the customer relationship, just as a SEBI-registered stockbroker does in India. DriveWealth plays the role of the PCM and depository combined – the infrastructure layer that handles custody and settlement. Just as an Indian broker using a PCM is no less regulated or accountable to its customers, neither is Vested. In both markets, the customer-facing broker and the clearing infrastructure can be separate layers until it makes economic sense for the customer-facing broker to invest into its own clearing infrastructure.
What It Means to Be a Licensed US Broker-Dealer
Vested, through our registered entity VF Securities, Inc., is a FINRA-member broker-dealer, overseen by the SEC. We are the only fintech platform serving Indian investors with this license and the license comes with a significant, non-negotiable set of ongoing obligations.
Here’s what Vested is legally responsible for:
Know Your Customer (KYC) – FINRA Rule 2090
Before opening an account and throughout the life of the customer relationship, Vested must gather and retain essential facts about every investor. This includes identity verification, source of wealth, investment objectives, risk tolerance, financial background, and authorization records. The obligation doesn’t end at onboarding; it is continuous.
Suitability & Regulation Best Interest – FINRA Rule 2111 + Reg BI
Any investment recommendation Vested makes must be genuinely in the customer’s best interest. The SEC’s Regulation Best Interest, introduced in 2020, raised the standard beyond simple “suitability” as broker-dealers must now demonstrate that recommendations serve the retail investor’s interests, not just meet a minimum threshold. Vested is legally accountable for every recommendation on its platform.
Vested does not currently make investment recommendations, and we consistently represent this position to FINRA. The platform provides access and information; it does not advise customers on which securities to buy or sell.
Anti-Money Laundering (AML) Program – FINRA Rule 3310
Vested must maintain a written AML compliance program, tested annually by an independent party. This program includes transaction monitoring for suspicious activity, filing Suspicious Activity Reports (SARs) with FinCEN, OFAC sanctions screening, and a designated compliance officer. This program belongs to Vested – it is not inherited from the clearing firm.
Customer Identification Program (CIP)
Under the Bank Secrecy Act, Vested must verify the identity of every customer it onboards, cross-reference them against government watchlists, and maintain detailed records. The introducing broker is the entity legally responsible for knowing who its customers are.
Net Capital Requirements – SEC Rule 15c3-1
Broker-dealers must maintain minimum levels of net capital at all times. This requirement ensures the firm can meet its financial obligations and protects investors in the event of operational difficulty. Vested monitors and certifies this on an ongoing basis.
In addition, FINRA and the SEC require annual audits of our financials every year, providing an independent check on our capital position and overall financial health.
Books & Records – SEC Rules 17a-3 and 17a-4
Vested must maintain comprehensive records of customer communications, orders, account information, and transactions — and make them available to regulators on request. These records form the audit trail that regulators rely on.
Licensed Personnel & Supervision
Anyone at Vested who provides investment-related services to customers must hold the appropriate FINRA licenses. The firm is responsible for supervising its registered representatives and maintaining written supervisory procedures.
FINRA Examinations
As a FINRA member, Vested is subject to periodic regulatory examinations. FINRA itself is overseen and audited by the SEC. This creates a layered oversight structure designed to protect investors.
SIPC Membership
Every registered broker-dealer is required by law to be a SIPC member. This means that if a firm fails, customers can recover their cash and securities up to $500,000 per account. Vested (VF Securities) is a SIPC member and thus provides its customers SIPC coverage.
How Responsibilities Are Divided Between Vested and the Clearing Broker
A useful way to think about this: DriveWealth, the clearing broker, provides the infrastructure that makes trading mechanically possible. Vested provides the regulated relationship that makes investing safe and accountable for the customer.
DriveWealth holds securities, settles trades, and manages custody. It processes orders and maintains operational records. What it does not do is know Vested’s customers, service their accounts, run Vested’s AML program, or undertake regulatory reporting of Vested’s customers.
Those responsibilities belong to Vested. While certain functions are shared with DriveWealth, Vested (VF Securities Inc.) retains ultimate responsibility for supervising DriveWealth’s activities and remains accountable for that work. Vested also carries its own obligations around customer privacy, cybersecurity, and disaster recovery, areas where both firms have duties but where Vested remains accountable for protecting its customers. The customer relationship, and the legal accountability that comes with it, sits with the introducing broker, not the clearing firm.
Some of the most well-known US brokers started with this structure
Cash App (Square) launched stock trading in 2019 as a licensed introducing broker, with DriveWealth serving as the carrying broker and Axos as the clearinghouse. The regulatory obligations were Cash App’s to own.
Robinhood operated as an introducing broker for the first five years of its existence, serving over six million customers, before building its own clearing system. In 2018, when it announced “Clearing by Robinhood,” it described the project as its “most complex engineering and regulatory challenge.” Building clearing from scratch was a long-term infrastructure goal, not a prerequisite for being a legitimate, regulated broker.
Revolut, Stash, Moneylion, and many others have used or continue to use clearing partnerships as the foundation for regulated investing products. The introducing broker license with all its attendant obligations is what makes those products legitimate.
E*Trade ran on third-party clearing for roughly the first 13 years of its existence. It was only after going public in 1996 that the company used the proceeds to build its own self-clearing operation. For more than a decade, one of the most recognisable names in US online brokerage operated as a fully legitimate, regulated broker without clearing its own trades.
The pattern here is consistent: the clearing partner provides infrastructure, and the licensed broker provides the regulatory framework, customer trust, and accountability.
What This Means for You as an Investor
As a customer of a licensed broker-dealer, you have protections that a non-regulated or wrapper platform simply cannot offer:
Your investments are covered by SIPC insurance (up to $500,000), which protects you in the event of a brokerage firm failure. Vested is legally obligated to act within all US stock broker regulations and is regularly examined for compliance with these regulations. Your account is governed by US federal securities law, the same rules that apply to every regulated broker and investor in America. And if something goes wrong, you have access to FINRA’s dispute resolution processes.
Vested Finance, Inc. is an SEC-registered Investment Advisor. VF Securities, Inc. (the broker-dealer entity of Vested) is a FINRA-registered broker-dealer and member of SIPC. This post is for educational purposes only and does not constitute investment advice. Investments in securities involve risk, including the possible loss of principal. Please review all applicable disclosures before investing.