SIE practice questionmediumBroker-Dealer vs. Investment Adviser
What is the key distinction between a broker-dealer and an investment adviser?
- ABroker-dealers execute transactions while investment advisers provide advice for a fee✓ Correct answer
- BBroker-dealers only work with institutional clients
- CInvestment advisers are regulated by FINRA and broker-dealers are not
- DOnly broker-dealers can trade securities
Explanation
Why A — Broker-dealers execute transactions while investment advisers provide advice for a fee
A broker-dealer's primary function is to execute securities transactions (buying and selling) on behalf of clients (broker) or for its own account (dealer). An investment adviser's primary function is to provide investment advice for compensation. While both may provide advice, the regulatory frameworks differ: broker-dealers register with the SEC and are FINRA members, while investment advisers register with the SEC or state regulators under the Investment Advisers Act of 1940.
Turn it into reps
Reading one answer is not the same as being ready
Lucky the Banker is a free practice app with 1,867+ SIE questions, weak-area tracking, and timed mock exams. No credit card, no paywall.
Related Capital Markets & Offerings questions
- Which market participant is responsible for maintaining records of security ownership and issuing and canceling…
- FINRA is best described as which type of organization?
- In which market do issuers sell newly created securities to investors for the first time?
- When an investor buys shares of Apple stock on the New York Stock Exchange (NYSE), this transaction takes place in the: