SIE Exam Question 285: Answer and Explanation

Question: 285

A broker-dealer just sold some stock out of its own inventory to a customer. The firm

• A. Just acted as an agent in the transaction; and will make a commission.
• B. Just violated FINRA rules and will be disciplined for the sale.
• C. Just acted as a principal in the transaction; and may earn a markup.
• D. Just participated in an OTC trade; and it occurred in the fifth market.

Correct Answer: C

Explanation:

C: They firm acted as a dealer; as the principal in this transaction. This is not a violation of any rules. The dealer may earn a markup on the transaction; if the dealer previously purchased this security at a lower price.