Uniform Securities Agent State Law (Series 63) Practice Exam

What is the definition of a broker/dealer?

1. A person managing personal investment accounts

2. An entity only trading securities in its own account

3. Any individual involved in securities transactions for themselves or others

4. A financial planner not engaged in trading activities

The correct answer is: Any individual involved in securities transactions for themselves or others

The definition of a broker/dealer encompasses any individual or entity that engages in the business of facilitating securities transactions for themselves or for others. This means that a broker can act on behalf of clients, executing trades, providing advice, and handling other functions related to the buying and selling of securities. A dealer, on the other hand, trades securities for their own account in addition to facilitating trades for clients. In the context of the choices provided, the correct answer captures this comprehensive view of the broker/dealer role by including both activities—trading for clients and trading for oneself. This broad definition recognizes that broker/dealers can participate in the market in multiple capacities. The other options are not accurate representations of the nuanced responsibilities of a broker/dealer. Managing personal investment accounts refers to individual investors rather than professionals facilitating trades. An entity that only trades securities in its own account describes a dealer, but it does not encompass the entire scope of a broker/dealer's function since it omits the broker's role in client transactions. Lastly, a financial planner who is not engaged in trading activities does not fit the definition of a broker/dealer, as they typically focus on advising clients on financial strategies rather than executing securities transactions.