Definition
A broker is an agent who arranges transactions between buyers and sellers — or between parties to contracts — on behalf of one or both of them, earning compensation (called brokerage or a commission) for that service. The defining characteristic of a broker, as distinguished from a dealer or factor, is that a broker typically does not take title to or possession of the property involved and does not act in their own name. The broker's function is to bring parties together and facilitate the deal; the contract, once made, runs between the principals.
The term now encompasses several distinct commercial contexts:
1. REAL ESTATE BROKER: A licensed agent who represents buyers, sellers, landlords, or tenants in real property transactions. Real estate brokers owe fiduciary duties to their clients and are subject to state licensing requirements. Their right to a commission typically turns on whether they produced a ready, willing, and able buyer (or tenant) under the terms authorized by the listing agreement.
2. SECURITIES BROKER (BROKER-DEALER): An individual or firm that executes orders to buy and sell securities on behalf of clients. Broker-dealers are regulated at the federal level and owe duties of fair dealing, suitability, and — under more recent regulatory developments — a best-interest standard to retail customers.
3. INSURANCE BROKER: An agent who places insurance coverage on behalf of insureds, distinguishable from an insurance agent who typically represents the insurer. The distinction matters for determining who bears liability for errors in placement.
4. CUSTOMS BROKER: A licensed specialist who handles import and export documentation and regulatory compliance on behalf of importers and exporters.
5. MORTGAGE BROKER: An intermediary who connects borrowers with lenders for real property loans, without itself funding the loan.
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Common Language
Modern common usage (Wiktionary): The Wiktionary entry for "broker" as a standalone noun is thin; the primary entry captured here reflects the comparative form of "broke," which is unhelpful. In ordinary contemporary English, "broker" is widely understood to mean a middleman or dealmaker — someone who arranges agreements between parties, as in "he brokered a peace deal."
Historical common usage (Webster's 1913): "One who transacts business for another; an agent. An agent employed to effect bargains and contracts, as a middleman or negotiator, between other persons, for a compensation commonly called brokerage. He takes no possession, as broker, of the subject matter of the negotiation. He generally contracts in the names of those who employ him, and not in his own."
The Webster's 1913 definition is unusually close to the legal meaning — closer than most common-language definitions get — because "broker" was already a commercial term of art by the nineteenth century. The legal gap worth noting is one of precision: the common usage tolerates the word loosely (any intermediary or fixer), while the legal definition carries specific consequences around agency duties, licensing obligations, commission rights, and liability exposure that vary sharply by the type of brokerage involved.
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Common Confusion
BROKER vs. FACTOR: The historical sources flag this distinction repeatedly. A factor (or commission merchant) takes physical possession of goods and may buy and sell in their own name. A broker does neither. This distinction mattered enormously in nineteenth-century commercial law and remains relevant in agency and UCC contexts. Researchers encountering "factor" in pre-twentieth century sources should not assume it means what "broker" means today.
BROKER vs. DEALER: In securities law, a broker executes transactions for others; a dealer buys and sells for its own account. Many firms act as both, hence the regulatory term "broker-dealer." The distinction carries different duty and capital requirement implications.
BROKER vs. AGENT: All brokers are agents, but not all agents are brokers. A broker's agency is typically limited to the transaction for which they are engaged; they rarely have authority to bind the principal to terms beyond what is expressly authorized.
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Recognized Forms
/SUBTYPES
Real estate broker; securities broker; broker-dealer; insurance broker; customs broker; mortgage broker; pawnbroker (historically); ship broker; note broker; money broker (flagged in Bouvier's).
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Why It Matters in Research
The word "broker" is a research trap across time periods because the legal duties, licensing requirements, and liability rules attached to it vary dramatically by subtype and era.
In historical sources (pre-1930s), "broker" most often means a commercial intermediary in goods or commodities, with stockbrokers treated as a recognized exception to ordinary broker rules. Rapalje & Lawrence notes explicitly that stockbrokers "are an exception to these rules" regarding how margin transactions were handled. Researchers reading nineteenth-century cases or treatises must identify which type of brokerage is at issue before importing the reasoning into a modern context.
Commission-splitting and dual agency issues appear across all broker subtypes but are handled differently. In real estate, dual agency (representing both buyer and seller) requires disclosure and consent and is prohibited outright in some states. In securities, similar conflicts are addressed through different regulatory mechanisms. A researcher moving between these domains should not assume that rules developed in one brokerage context transfer cleanly to another.
The right to a brokerage commission is a recurring litigation issue in real estate. The "procuring cause" doctrine and the "ready, willing, and able buyer" standard generated substantial case law through the twentieth century; historical sources do not always reflect the modern rule, and the rule itself varies by jurisdiction.
Anderson's Dictionary of Law flags that "'broker' is no longer limited to a person employed to negotiate contracts for the sale or exchange of goods" — a signal that even by the late nineteenth century, the term was expanding. That expansion has continued; researchers should use the specific subtype (real estate broker, securities broker, etc.) as the operative search term in modern legal databases rather than "broker" alone, which will return an unmanageable and cross-domain result set.
For securities research, the regulatory framework for broker-dealers is primarily federal (Securities Exchange Act of 1934, FINRA rules), but the fiduciary and agency duties owed to clients have a common-law and state-law dimension that the federal framework does not fully displace.
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Historical Dictionary Support
The historical dictionaries converge on the core definition with notable consistency: a broker is an agent who brings parties together for compensation, takes no possession of the subject matter, and acts in the name of the principal rather than their own name. Black's (both editions) quotes Story's Agency and Paley's Principal and Agent for this core formulation. Anderson's repeats the Story formulation verbatim.
The more instructive divergence is what the historical sources omit or underweight. Bouvier's entry is nearly empty, directing readers to "MONEY BROKER" — suggesting that in Bouvier's era, the money broker subspecies was the variant most likely to generate legal questions. Rapalje & Lawrence provides the most operationally useful historical treatment, distinguishing broker from factor and addressing the stockbroker exception in some depth.
None of the historical sources meaningfully addresses what would become the dominant twentieth-century brokerage context — the regulated securities broker-dealer — or the fiduciary duty architecture that modern real estate brokerage law has developed. Researchers using these sources for pre-1933 research will find the historical definition serviceable; for anything touching modern securities regulation or real estate licensing law, the historical dictionaries are starting points only.
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Jurisdictional Note
Real estate broker licensing, commission rights, and dual agency rules are entirely state-law matters and vary significantly. Securities broker-dealer regulation is predominantly federal, but state "blue sky" laws add a layer that can affect registration and conduct requirements. Insurance broker regulation is primarily state-based, with meaningful variation in how broker-versus-agent distinctions are drawn and what duties attach.
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Encyclopedia Cross-Reference
Broker Fiduciary Duties — Loyalty, Disclosure, Confidentiality, and Dual Agency (The Law Mind Real Estate Transactions & Construction Encyclopedia)
Broker Liability — Negligence, Misrepresentation, and Failure to Disclose (The Law Mind Real Estate Transactions & Construction Encyclopedia)
Special Topics — Regulation of Broker-Dealers (The Law Mind Business Organizations & Corporate Law Encyclopedia)
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