Uniform Securities Agent State Law (Series 63) Practice Exam

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What would typically require registration by a broker/dealer?

Selling securities to retail clients
Holding securities in trust
Merging with another company
Investing in hedge funds

The correct answer is: Selling securities to retail clients

Selling securities to retail clients typically requires registration by a broker/dealer because this activity falls under the definition of broker/dealer services. In this context, a broker/dealer is an entity or individual that buys and sells securities on behalf of clients and earns a commission or fees for these transactions. The registration process ensures that the broker/dealer complies with various regulatory requirements designed to protect investors and maintain market integrity. In contrast, holding securities in trust does not usually necessitate registration as a broker/dealer since this activity does not involve the buying and selling of securities. Merging with another company may involve various regulatory considerations but does not inherently require broker/dealer registration as it relates to company operations rather than trading securities. Similarly, investing in hedge funds is typically handled directly by the investment firms managing the fund, rather than requiring individual broker/dealer registration. Thus, selling securities to retail clients is the definitive activity that mandates such registration, aligning it with the regulatory framework established by securities laws.