SIE Knowledge of Capital Markets Question 25: Answer and Explanation

Question: 25

Where are the investments of an introducing broker's customers kept?

• A. At the SEC.
• B. At the introducing broker's headquarters office.
• C. At the clearing broker's business.
• D. At the introducing broker's bank.

Correct Answer: C

Explanation:

C: Choice C is correct because an introducing broker may take an order for a clearing broker to complete. Funds and investments of an introducing broker's customer are kept at the clearing broker's business. Choice A is incorrect the SEC provides oversight to the securities markets and their SROs, but does not act as a participant in the market. Choices B is incorrect because the introducing broker does not have adequate capital to qualify to hold its customers' investments. Choice D is incorrect because an introducing broker arranges for its customers' investments to be held at a clearing broker's business.