Uniform Securities Agent State Law (Series 63) Practice Exam

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What is one type of investment that would NOT fall under the definition of a broker/dealer?

Investment managers
Investment banks
Agents
Issuers

The correct answer is: Investment managers

The correct answer is investment managers, as they typically do not fit the definition of a broker/dealer. Broker/dealers are entities or individuals that buy and sell securities on behalf of clients (as brokers) or for their own account (as dealers). Investment managers, on the other hand, primarily manage investment portfolios on behalf of clients and may not engage in the buying and selling of securities directly. Investment banks and agents are more aligned with the activities characteristic of broker/dealers. Investment banks often act as intermediaries in the issuance and trading of securities, and agents perform transactions for clients in exchange for a commission, thereby fulfilling the role of brokers. Issuers also do not fall under this definition, but they are involved in the creation and distribution of securities, rather than buying and selling on behalf of others, which clearly describes the broker/dealer function.