Financial Industry Regulatory Authority (FINRA) Practice Exam 2025 - Free FINRA Practice Questions and Study Guide

When a broker-dealer charges a commission on a securities transaction, it is acting as an agent. In this context, acting as an agent means that the broker-dealer is facilitating the transaction on behalf of a client, executing trades in accordance with the client's instructions. The commission charged represents the fee for the service of bringing buyers and sellers together and is a common practice in agency transactions.

When functioning as an agent, the broker-dealer does not take ownership of the securities being traded. Instead, the broker-dealer's role is to match buyers with sellers and ensure the trade is completed, earning a commission for their services. This contrasts with the role of a principal, where the broker-dealer would act in a capacity that involves taking ownership of the securities and potentially realizing gains or losses from the transaction. In the scenario described, the broker-dealer's agency function is the primary focus, emphasizing the fee-based service it provides rather than assuming market risk.