Under U.S. federal securities regulations, which of the following statements regarding the compensation and trade execution capacities of a broker-dealer are correct? (Select TWO correct answers.)
- When executing a transaction as an agent (broker), the firm matches buyers and sellers and charges a commission.Cevap
- When executing a transaction as a principal (dealer), the firm trades for its own account and charges a mark-up or mark-down.Cevap
- CWhen acting in an agency capacity, the broker-dealer assumes position risk by holding the subject securities in its proprietary inventory.
- DA broker-dealer executing customer orders in a dealer capacity charges an asset-based fee calculated as a percentage of assets under management.
Cevap
The correct statements are that executing a trade as an agent involves matching buyers and sellers for a commission, and executing as a principal involves trading from inventory with a mark-up or mark-down.
Broker-dealers operate in two distinct capacities: as an agent (broker) matching trades between investors for a commission, or as a principal (dealer) buying/selling for their own account with a mark-up or mark-down.
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Broker vs. Dealer Capacity and Compensation Structures