Stock Jobs Stock Broker and Dealer Career Roles 1 — Questions and Answers
Question 1: What is the primary difference between a 'stockbroker' and a 'financial adviser'?
- Stockbrokers only work with corporations while financial advisers work with individuals
- Stockbrokers primarily execute trades while financial advisers provide comprehensive financial planning and investment guidance (Correct answer)
- Stockbrokers are licensed by the SEC while financial advisers are licensed by FINRA
- There is no difference; the terms are legally interchangeable
Correct answer: Stockbrokers primarily execute trades while financial advisers provide comprehensive financial planning and investment guidance
Stockbrokers focus on executing buy and sell orders for clients and are typically held to a suitability standard, while financial advisers provide holistic financial planning and often operate as fiduciaries.
Question 2: What is the Series 7 exam and who must pass it?
- An advanced options trading certification for experienced traders
- The General Securities Representative Exam required for broker-dealers to sell most types of securities (Correct answer)
- A regulatory examination for hedge fund managers
- An SEC-administered exam for portfolio managers at mutual funds
Correct answer: The General Securities Representative Exam required for broker-dealers to sell most types of securities
The Series 7, administered by FINRA, licenses broker-dealer representatives to sell a wide range of securities including stocks, bonds, mutual funds, and options to the public.
Question 3: What does a 'market maker' do in the stock market?
- Creates new markets by listing new stocks on exchanges
- Provides liquidity by continuously quoting bid and ask prices and standing ready to buy or sell securities (Correct answer)
- Makes decisions about which companies can list on major exchanges
- Marks up the price of securities before selling to retail investors
Correct answer: Provides liquidity by continuously quoting bid and ask prices and standing ready to buy or sell securities
Market makers are firms or individuals that provide liquidity by continuously posting buy (bid) and sell (ask) prices, profiting from the bid-ask spread while ensuring markets remain liquid.
Question 4: What is a 'registered investment adviser' (RIA)?
- A licensed stockbroker registered with a national exchange
- A firm or individual registered with the SEC or state regulators to provide investment advice for compensation (Correct answer)
- An investment analyst who has registered their research with FINRA
- A corporate treasurer registered to advise on company investments
Correct answer: A firm or individual registered with the SEC or state regulators to provide investment advice for compensation
An RIA is an investment adviser registered with the SEC (for firms managing $110 million+) or state regulators, held to a fiduciary duty to act in clients' best interests.
Question 5: What is a 'prime broker' and who uses their services?
- The leading broker by trading volume on a stock exchange
- A firm providing bundled services including clearing, financing, and custody primarily to hedge funds and large institutional clients (Correct answer)
- The first broker a company uses when going public
- A government-designated primary dealer in US Treasury securities
Correct answer: A firm providing bundled services including clearing, financing, and custody primarily to hedge funds and large institutional clients
Prime brokers provide comprehensive services to sophisticated institutional clients—especially hedge funds—including trade execution, securities lending, leverage, and reporting.
Question 6: What is the role of an 'investment banker' in relation to stocks?
- Managing retail client stock portfolios for a bank
- Helping companies raise capital through IPOs and secondary offerings while advising on mergers and acquisitions (Correct answer)
- Operating the bank's internal stock trading desk
- Providing bank customers with stock recommendations
Correct answer: Helping companies raise capital through IPOs and secondary offerings while advising on mergers and acquisitions
Investment bankers help corporations and governments raise equity and debt capital, underwrite securities offerings, and advise on strategic transactions like mergers and acquisitions.
Stock Jobs Stock Broker and Dealer Career Roles 1
What is the primary difference between a 'stockbroker' and a 'financial adviser'?