Series 63 practice questionmediumDisclosure of Markups
A broker-dealer acts as a principal in a trade and charges the client a markup. What, if anything, must be disclosed to the client under the USA?
- AThe capacity in which the broker-dealer is acting and the amount of the markup✓ Correct answer
- BOnly the amount of the markup
- COnly that a commission is charged
- DNo disclosure is required
Explanation
Why A — The capacity in which the broker-dealer is acting and the amount of the markup
When acting as principal, broker-dealers must disclose both the capacity and the amount of the markup or markdown to the client (USA Section 402). Disclosing one or neither is insufficient.
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