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CMA Intermediate · Financial Management and Business Data Analytics · Capital Market

Which of the following is a function that a stockbroker performs in the secondary market but a merchant banker managing a public issue does NOT perform as its core role?

Executing buy and sell orders on the stock exchange for investors is the stockbroker's function. Merchant bankers work mainly in the primary market, managing issues, drafting offer documents, underwriting and advising on pricing, rather than executing secondary-market trades.

  1. AExecuting buy and sell orders for investors on the stock exchangeCorrect
  2. BDrafting the offer document and acting as lead manager of the issue
  3. CUnderwriting the new issue of shares
  4. DAdvising the issuer on pricing of the new issue

Explanation

Stockbrokers are members of the exchange who execute trades for clients in the secondary market. The other three activities (drafting the offer document, underwriting, pricing advice) are core functions of a merchant banker in a primary-market issue.

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