Secondary Market
When a broker-dealer acts as a broker (agent) in a securities transaction, the firm earns:
Agent/broker = commission. Principal/dealer = markup or markdown.
Complete Analysis & Legal Rationale
When acting as a broker (agent), the firm facilitates the transaction between buyer and seller without taking ownership of the securities. The compensation is a commission charged to the customer.
Distractor Autopsy (Why Other Options Are Traps)
FINRA exam writers design incorrect distractors using specific calculation mistakes and regulatory misconceptions. Review why each option succeeds or fails:
A markup is charged when acting as a dealer (principal) selling from inventory.
A markdown is charged when acting as a dealer buying into inventory.
Matches the verified teaching point in the explanation.
A spread is the difference between bid and ask, relevant to dealers.
Official Standard: Secondary-market / antifraud framework including Section 10(b) (verify current text).
Official Standard: Outline-level citation: item maps to Series 7 topic coverage. Prefer a specific FINRA/SEC/MSRB rule citation in a later author pass.