Rule 2 of 8 in this unit1.1.4

1.1.4 Market Participants and their Roles

SIE outline 1.1.4

Three Investor Types

Retail: an individual, no status. Institutional: a large organization. Accredited: meets a dollar or income test. NOT three names for the same thing.

The method for this kind of question
  1. Place the name on the map first

Now answer

2 questions on this screen, from this outline item's own pool, so some will test a rule you met earlier in the unit. Pick an answer, say how sure you are, then reveal. Being sure and wrong is the most useful thing that can happen here, and the coach treats it that way.

Question 1Exam level

A large institutional client uses one firm that both brings in its trades and holds its assets, under a single relationship. What is that firm acting as?

How sure are you?

Correct: A. A prime broker does both the introducing and clearing roles for a large client, under one relationship.
B. A transfer agent keeps the ownership record; it does not introduce or clear trades.
C. A municipal advisor advises municipal issuers, not a trading client like this one.
D. A depository settles securities in bulk after a trade; it is not a single client's own relationship firm.

Unit: SIE outline 1.1.4

Question 2Harder

A municipal advisor is retained by a school district to help structure and time its own bond issue. How does this differ from a municipal trading desk at a dealer?

How sure are you?

Correct: B. The municipal advisor sits on the issuer's side of the table and owes it a fiduciary duty; the trading desk buys and sells municipal bonds with customers and other dealers and is compensated on the transaction.
A. The two are registered separately precisely because the duties differ.
C. Reverses the two roles.
D. The municipal advisor is separately registered for exactly this advisory role.

Unit: SIE outline 1.1.4

Next ruleIntroducing, Clearing, Prime

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