SIE Understanding Trading, Customer Accounts and Prohibited Activities Question 27: Answer and Explanation

Question: 27

FINRA Rule 2120 – "Commissions, Mark Ups and Charges" relates to which of the following situations?

• A. The broker-dealer advises the customer to make no trades until the following day.
• B. The broker-dealer has a conflict of interest because of personally owning the security being considered.
• C. The broker-dealer is acting in an agency capacity.
• D. The broker-dealer is closing the agency and will not be able to provide future service.

Correct Answer: C

Explanation:

C: Choice C is correct because the broker-dealer is receiving compensation for facilitating a trade, though not involved in buying the security from, nor selling the security to, the customer. Choices A, B, and D are incorrect because they do not involve the broker-dealer receiving compensation for assisting in the completion of a trade.