FINRA Uniform Securities State Law Examination Series-63 Question # 73 Topic 8 Discussion
Series-63 Exam Topic 8 Question 73 Discussion:
Question #: 73
Topic #: 8
Which of the following statements best explains the difference between an agent and a broker-dealer?
A.
An agent is an individual who represents a broker-dealer or an issuer and buys and sells securities he does not own in return for a commission on the transactions he executes. A broker-dealer may also buy and sell securities for his own portfolio, in which case the broker-dealer enjoys any price appreciation on those securities.
B.
A broker-dealer must be licensed in the state in which he conducts business, but there are no separate licensing requirements for agents.
C.
Agents are engaged exclusively in the purchase and sale of stocks whereas broker-dealers also buy and sell bonds and option contracts.
D.
Agents conduct their business exclusively in the secondary market, while broker-dealers also operate in the primary market.
The main difference between an agent and a broker-dealer is that an agent represents either a broker-dealer or an issuer and buys and sells securities he doesn’t own, receiving a commission for the trades he executes. A broker-dealer, when functioning as a dealer, is buying and selling for his own portfolio, thereby profiting from any price appreciation in the assets in his portfolio. Both agents and broker-dealers must meet state licensing requirements; both engage in the purchase and sale of stocks, bonds, and option contracts; and both operate in both the primary and secondary markets.
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