Question

Which TWO of the following statements are TRUE when a broker-dealer executes a principal transaction?

Act as a broker
Act as a dealer
Charge a mark-up or a mark-down
Charge a commission


[A] I and III
[B] I and IV
[*C] II and III
[D] II and IV

Answer 1

C) II and III

• Act as a dealer
• Charge a mark-up or a mark-down

Step-by-step explanation:

Dealers can purchase and sell securities on their own accounts, this is called position trading. When they carry on this type of transactions, they charge markups instead of commissions.

Brokers act like agents, and they can only arrange a transaction between clients and they charge a commission for their work.