A diversified financial services firm conducts both brokerage services and investment advisory operations for retail and institutional clients. Which of the following statements correctly distinguish the regulatory duties, compensation models, and execution capacities of Investment Advisers and Broker-Dealers under federal securities regulations? Select all that apply.
- Investment advisers owe a fiduciary duty to act in their clients' best interests at all times and are primarily compensated through asset-based or flat advisory fees rather than transaction commissions.Cevap
- A broker-dealer acting in a principal capacity buys or sells securities for its own inventory account and receives compensation in the form of a mark-up or mark-down.Cevap
- CA broker-dealer executing a transaction in an agency capacity takes title to the underlying inventory and charges a mark-up instead of a commission.
- DAn introducing broker-dealer holds direct clearing membership with the National Securities Clearing Corporation (NSCC) to clear and settle customer trades independently.
Cevap
The correct statements are that investment advisers owe a fiduciary duty and are primarily compensated via fee-based structures, and that broker-dealers acting in a principal capacity trade from inventory earning a mark-up or mark-down.
The statements highlighting the fiduciary standard of investment advisers (compensated via fees) and the principal capacity of dealers (trading from inventory with mark-ups/mark-downs) accurately describe regulatory definitions under FINRA and SEC rules.
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Broker-Dealer Capacity and Investment Adviser Fiduciary Status