Secondary Market
When a broker-dealer sells securities from its own inventory and charges a markup, it is acting as:
Principal = dealer trades from inventory. Agent = broker facilitates trades.
Complete Analysis & Legal Rationale
When a broker-dealer trades from its own inventory, it acts as a PRINCIPAL (dealer). In this capacity, it charges a markup (on sales) or markdown (on purchases) rather than a commission.
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:
Agents facilitate trades without owning the securities and charge commissions.
Matches the verified teaching point in the explanation.
A fiduciary has a duty of care but is not a trading capacity designation.
A custodian holds assets but doesn't describe the trading relationship.
Official Standard: Secondary-market / antifraud framework including Section 10(b) (verify current text).
Official Standard: Fair pricing / commissions standards for member transactions (verify current text).
Official Standard: Outline-level citation pending rule-specific upgrade. Verify against current FINRA Series 7 outline.