Investment Company and Variable Contracts Products Representative (Series 6)Practice Exam

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Who typically charges a commission for executing trades?

Investment advisers
Bank managers
Broker-dealers
Credit analysts

The correct answer is: Broker-dealers

Broker-dealers are financial firms or individuals that facilitate the buying and selling of securities on behalf of clients or for their own accounts. They generally charge commissions for executing trades, which is a primary source of their revenue. The commission is typically a percentage of the trade value or a fixed amount charged per transaction, which is disclosed to the client in advance. This role is essential in the securities market, as broker-dealers connect buyers and sellers, providing liquidity and efficient price discovery. In contrast, investment advisers typically charge fees based on a percentage of assets under management or flat fees for their services, rather than for executing trades. Bank managers focus on banking services and may not be involved in the trading of securities. Credit analysts assess the credit risk of organizations or individuals and do not engage in trading activities, thus they do not charge commissions related to trades.