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CS Professional · Strategic Management and Corporate Finance · Role of Intermediaries in Fund Raising

A stock broker executes a client's purchase order on the exchange. Which statement correctly describes the broker's status and role?

A stock broker must be registered with SEBI and be a member of a recognised stock exchange to execute trades for clients. It is not automatically an underwriter and does not act as a depository holding securities.

  1. AThe broker needs registration with SEBI and trades as a member of a recognised stock exchange on behalf of clientsCorrect
  2. BThe broker may trade without registration if it deals only for retail clients
  3. CThe broker acts as the issuer's underwriter by default on every trade
  4. DThe broker is the depository holding the client's securities

Explanation

Stock brokers must hold a SEBI registration and be members of a recognised stock exchange to buy, sell or deal in securities for clients. Underwriting is a separate activity, and custody of securities is the depository's function.

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