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Question

Difficulty: EasyMarket Participants and Investor Classifications

Pair each capital market entity or investor category with its defining regulatory attribute or operational mandate.

  • Qualified Institutional Buyer (QIB)Institutional entity holding a portfolio of at least $100 million in qualifying securities.
  • Accredited InvestorIndividual meeting specific income or net worth threshold requirements under SEC rules.
  • Broker acting in an Agency RoleFacilitates transactions between buyers and sellers for a commission fee.
  • Carrying FirmMaintains custody of customer assets and settles securities transactions.

Answer

Qualified Institutional Buyer pairs with institutions owning/investing at least $100 million in qualifying securities; Accredited Investor pairs with individuals meeting SEC net worth or income thresholds; Broker in an Agency Role pairs with facilitating transactions for a commission fee; Carrying Firm pairs with maintaining custody of customer assets and settling securities transactions.
Each market participant category is correctly aligned with its governing regulation or operational definition: QIBs hold at least $100 million in qualifying securities; Accredited Investors satisfy personal income/net worth tests; Brokers in agency roles connect buyers and sellers for commissions; and Carrying Firms retain asset custody and clear trades.

Step-by-Step Solution

1
Identify the institutional threshold defining a Qualified Institutional Buyer (QIB).
QIB status requires an institutional entity to own and invest at least $100 million in securities.
Rule 144A establishes the $100 million securities threshold for institutional buyers.
2
Identify the financial thresholds for individual Accredited Investors.
Accredited status requires 200,000+individualannualincome(200,000+ individual annual income ( 300,000 joint) or $1,000,000+ net worth excluding primary residence.
Regulation D defines accredited criteria for non-registered offerings.
3
Determine the operational characteristics of a broker in an agency role.
Firms in agency roles act as intermediaries connecting buyers and sellers for commissions.
Agency transactions do not involve firm inventory; compensation comes from commissions.
4
Determine the operational responsibilities of a carrying broker-dealer.
Carrying firms clear trades and safekeep customer cash and securities.
Carrying firms perform full custody, clearing, and recordkeeping services.

Key Concept

Market Participants and Investor Classifications
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Market Participants and Investor Classifications

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