Under federal securities regulations, which of the following statements correctly describe key differences between Investment Advisers (IAs) and Broker-Dealers (BDs)?
- Investment Advisers are compensated primarily through fee-based structures (such as a percentage of assets under management), whereas Broker-Dealers are compensated through transaction-based fees (such as commissions, markups, or markdowns).Cevap
- Investment Advisers are subject to a fiduciary standard under the Investment Advisers Act of 1940, requiring them to act in the best interest of their clients at all times.Cevap
- CBroker-Dealers act primarily as non-profit intermediaries whose core business model is charging mandatory advisory fees rather than trade execution commissions.
- DInvestment Advisers serve as Self-Regulatory Organizations (SROs) with authority to prosecute criminal securities fraud.
Cevap
The correct statements are that Investment Advisers are compensated primarily through fee-based structures while Broker-Dealers earn transaction-based commissions or markups, and that Investment Advisers are bound by a fiduciary standard under the Investment Advisers Act of 1940.
Investment Advisers are registered entities in the business of providing investment advice for compensation, typically structured as asset-based or hourly fees, and they owe an ongoing fiduciary duty to their clients under the Investment Advisers Act of 1940. In contrast, Broker-Dealers are primarily engaged in executing securities transactions for commissions or dealer spreads.
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Distinction between Broker-Dealers and Investment Advisers
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