General Securities Representative (Series 7) Practice Exam

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Study for the General Securities Representative (Series 7) Exam. Boost your confidence with flashcards and multiple choice questions, each featuring explanations. Prepare effectively for your evaluation!

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What does a broker's broker never do?

Acts as a market maker
Acts in a principal transaction
Provides advice to clients
All of the above

The correct answer is: Acts as a market maker

A broker's broker is specifically designed to serve other brokers rather than individual investors. Their primary role is to facilitate trading among broker-dealers and assist in executing large orders without affecting the market price. By not acting as a market maker, a broker's broker avoids the potential conflict of interest that could arise from participating in the buying and selling of securities as a principal. They do not take ownership of the securities themselves, which means they do not engage in principal transactions where they buy and sell securities for their own account. This allows them to focus on providing a level of service that benefits other brokers by helping them find liquidity and execute their trades efficiently. Additionally, broker's brokers typically do not provide personal investment advice to clients; their services are aimed at brokers who need assistance in executing trades rather than at end investors. This role further emphasizes the broker's broker's lack of involvement in activities that could compromise their objective, agency-based function in the market. Thus, the answer correctly highlights the unique position of a broker's broker in the marketplace by indicating that they do not partake in market-making activities.