SIE Knowledge of Capital Markets Question 24: Answer and Explanation

Question: 24

Which of the following is the main role of a broker?

• A. Brokers typically buy or sell on their own behalf.
• B. Brokers have the knowledge and financial strength to buy investments on behalf of the customer.
• C. Brokers offer bid and ask prices that do not change for 72 hours.
• D. Brokers eliminate the need for a customer to have a registered representative.

Correct Answer: B

Explanation:

B: Choice B is correct because brokers are registered persons or firms with one or more registered persons, who have invested capital that qualifies them to act on behalf of customers to purchase securities. Choice A is incorrect because brokers are only required to have enough invested capital to buy securities on behalf of the investor. A higher level of capital is required to buy or sell on their own behalf. If they had the higher invested capital, they would be known as dealers. Choice C is incorrect because bid and ask prices may change in less than 72 hours. A broker is a registered representative or a firm with one or more registered representative. Only a registered person may advise a customer regarding securities.