Stock Jobs Stock Broker and Dealer Career Roles 2 — Questions and Answers
Question 1: What is a 'floor broker' on a stock exchange?
- A broker who manages accounts from the ground floor of a financial building
- An exchange member who executes trades on the exchange floor on behalf of clients (Correct answer)
- A junior broker handling basic account services
- A broker specializing in low-price or 'floor' stocks
Correct answer: An exchange member who executes trades on the exchange floor on behalf of clients
A floor broker is a licensed member of a stock exchange who executes buy and sell orders on the trading floor on behalf of brokerage firms and their clients.
Question 2: What does a 'securities analyst' (equity research analyst) do?
- Analyzes suspicious trading patterns for compliance purposes
- Researches companies and industries to produce investment recommendations and price targets for stocks (Correct answer)
- Analyzes SEC filings for regulatory compliance issues
- Provides market timing signals to institutional traders
Correct answer: Researches companies and industries to produce investment recommendations and price targets for stocks
Securities analysts research companies, analyze financial statements, model future earnings, and issue buy/sell/hold ratings and price targets to guide investment decisions.
Question 3: What is a 'compliance officer' responsible for in a securities firm?
- Complying with client requests for portfolio changes
- Ensuring the firm and its employees follow all applicable securities laws, regulations, and internal policies (Correct answer)
- Completing regulatory filings on behalf of the company
- Overseeing complete audits of client account statements
Correct answer: Ensuring the firm and its employees follow all applicable securities laws, regulations, and internal policies
A compliance officer monitors the firm's activities, develops and enforces policies to ensure regulatory compliance, conducts training, and manages relationships with regulators.
Question 4: What is the role of a 'transfer agent' in the stock market?
- An agent who transfers clients between brokerage firms
- A company appointed by a corporation to maintain records of shareholders and manage dividend payments and share issuances (Correct answer)
- A FINRA representative who transfers securities licenses between states
- A broker who facilitates transfers of large block trades
Correct answer: A company appointed by a corporation to maintain records of shareholders and manage dividend payments and share issuances
Transfer agents keep records of who owns a company's stocks and bonds, process certificates, handle dividend payments, and manage corporate actions like stock splits and mergers.
Question 5: What is a 'custodian' in the context of securities?
- The janitor who maintains brokerage office facilities
- A financial institution that holds and safeguards securities and cash on behalf of clients (Correct answer)
- A court-appointed guardian managing assets for a minor
- The person responsible for a company's safe deposit of cash reserves
Correct answer: A financial institution that holds and safeguards securities and cash on behalf of clients
A securities custodian (like a bank or brokerage) holds client assets for safekeeping, processes transactions, and provides record-keeping and reporting services.
Question 6: What does a 'clearing house' do in securities trading?
- Clears regulatory violations by reviewing broker-dealer practices
- Acts as intermediary between buyers and sellers to ensure trades are settled properly and counterparty risk is managed (Correct answer)
- Clears the trading floor after market hours for the next session
- Issues clearance for new securities to begin trading on exchanges
Correct answer: Acts as intermediary between buyers and sellers to ensure trades are settled properly and counterparty risk is managed
A clearing house acts as buyer to every seller and seller to every buyer, guaranteeing trade settlement and managing counterparty risk to ensure financial stability in markets.
Stock Jobs Stock Broker and Dealer Career Roles 2
What is a 'floor broker' on a stock exchange?