Definition of an Agent of a Broker-Dealer

Lesson

Agents of Broker-Dealers are individuals who represent broker-dealers in effecting securities transactions and are subject to various laws, regulations, and guidelines to ensure ethical business practices.

Practice Question #1

Which of the following best describes an Agent of a Broker-Dealer?

A) An individual who provides investment advice for compensation

B) A firm that buys and sells securities for its own account or on behalf of customers

C) An individual who represents a broker-dealer in effecting securities transactions

D) A person who oversees the activities of a broker-dealer

Select an option above to see an explanation here.

A) This describes an Investment Adviser. B) This describes a Broker-Dealer. C) An Agent of a Broker-Dealer represents a broker-dealer in effecting securities transactions. D) This could describe a supervisor or regulator but not an Agent of a Broker-Dealer.

Terms

Agent of a Broker-Dealer:: An individual representing a broker-dealer in effecting securities transactions.
Broker-Dealer:: A firm that buys and sells securities for its own account or on behalf of its customers.

Practice Question #2

Which regulatory authority oversees the activities of broker-dealers and their registered representatives?

A) SEC

B) FINRA

C) State securities regulators

D) All of the above

Select an option above to see an explanation here.

A) The SEC is a federal agency that regulates the securities industry. B) FINRA is a self-regulatory organization that oversees broker-dealers and their registered representatives. C) State securities regulators enforce the provisions of the Uniform Securities Act. D) All of these regulatory authorities oversee the activities of broker-dealers and their registered representatives.

Do Not Confuse With

Investment Adviser vs. Broker-Dealer:: Investment advisers provide investment advice for compensation, while broker-dealers buy and sell securities for their accounts or on behalf of customers.
Investment Adviser Representative vs. Agent of a Broker-Dealer:: Investment adviser representatives provide investment advice on behalf of investment advisers, while broker-dealer agents affect securities transactions on behalf of broker-dealers.

Practice Question #3

Which of the following best defines an Agent of a Broker-Dealer?

A) An individual who represents a broker-dealer in effecting securities transactions

B) A person who manages a broker-dealer's investment portfolio

C) A person who provides legal advice to a broker-dealer

D) An individual who audits a broker-dealer's financial statements

Select an option above to see an explanation here.

A) An Agent of a Broker-Dealer is an individual who represents a broker-dealer in effecting securities transactions. This is the correct definition. B) A person who manages a broker-dealer's investment portfolio is not an Agent of a Broker-Dealer. C) A person who provides legal advice to a broker-dealer is not an Agent of a Broker-Dealer. D) An individual who audits a broker-dealer's financial statements is not an Agent of a Broker-Dealer.

Real-World Example

An agent of a broker-dealer may help a client purchase shares of a mutual fund by placing the order on the client's behalf and ensuring that the transaction is executed promptly and efficiently.