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Official Practice ProblemFINRA Series 7 Blueprint: Function 3
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Question #s7-prep2-s7-q-221Function 3Fundamental

Secondary Market

When a broker-dealer charges a commission, it has acted as:

Correct Choice: A

Commission = Agent. Markup/Markdown = Principal.

Complete Analysis & Legal Rationale

When a broker-dealer charges a commission, it is acting as an AGENT, facilitating a transaction between buyer and seller without taking ownership of the securities. Agents earn commissions.

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:

Choice ACorrect
None

Matches the verified teaching point in the explanation.

Choice BIncorrect
Concept Trap

Principals buy/sell from their own inventory and charge a markup/markdown, not a commission.

Choice CIncorrect
Concept Trap

Underwriters help issuers bring new securities to market.

Choice DIncorrect
Concept Trap

Market makers are principals who maintain inventory and provide liquidity.

Authorities & References:

Official Standard: Secondary-market / antifraud framework including Section 10(b) (verify current text).

Official SourceSEC Securities Exchange Act of 1934 — Securities Exchange Act of 1934

Official Standard: Outline-level citation pending rule-specific upgrade. Verify against current FINRA Series 7 outline.

Official SourceFINRA FINRA Series 7 Content Outline — General Securities Representative Examination (Series 7) Content Outline
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Regulatory Authority & Citations: Primary Legal Sources

Verified citations governing Question #s7-prep2-s7-q-221 (FINRA Series 7 Content Outline)

To pass the FINRA Series 7, candidates must understand not just the calculation formulas, but the exact federal securities acts, SRO rulebooks, and statutory frameworks that enforce them. Review the primary authority records below:

SECSecurities Exchange Act of 1934— Securities Exchange Act of 1934

Secondary-market / antifraud framework including Section 10(b) (verify current text).

Read SEC Official Rule
FINRAFINRA Series 7 Content Outline— General Securities Representative Examination (Series 7) Content Outline

Outline-level citation pending rule-specific upgrade. Verify against current FINRA Series 7 outline.

Read FINRA Official Rule

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