Trading, Accounts & Prohibited ActsQuestion 179 of 398
A broker-dealer fills a customer's buy order by selling shares out of its own inventory and adds a markup to the price. In what capacity did the firm act?
a.As a principal (dealer)
b.As an agent (broker)
c.As an underwriter
d.As a transfer agent
Explanation
When a firm trades from its own account with a customer and charges a markup or markdown, it acts as a principal, or dealer. When it merely arranges a trade between a customer and a third party for a commission, it acts as an agent, or broker.
Law Reference: Securities Exchange Act of 1934Practice all 398 questions free — no signup required.
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