SIE Exam Question 266: Answer and Explanation

Question: 266

Among the differences between an introducing broker-dealer and a clearing carrying broker-dealer is that clearing firms:

• A. Maintain possession and control of securities and introducing firms do not.
• B. Are members of all major securities exchanges and introducing firms are not.
• C. Are permitted to engage in investment banking and underwriting of new issues of securities and introducing firms are not.
• D. All of these are differences.

Correct Answer: A

Explanation:

A: The terms 'clearing' and 'carrying' have to do with a brokerage firm's performance of certain functions most other firms are not permitted to do, such as have physical possession and custody of customers' cash and securities.