SIE (Securities Industry Essentials) Practice Exam

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Among the differences between an introducing broker-dealer and a clearing carrying broker-dealer is that clearing firms:

Offer financial advice and introducing firms do not
Directly engage with the client and introducing firms do not
Maintain possession and control of securities and introducing firms do not
Only transact in options and futures

The correct answer is: Maintain possession and control of securities and introducing firms do not

Clearing firms maintain possession and control of securities, which means they physically hold and handle the securities involved in a trade. This is a crucial role in the financial industry, as it ensures the safe and efficient transfer of securities between buyers and sellers. The other options are incorrect because A. Both introducing firms and clearing firms can offer financial advice to clients. This is not a defining difference between the two types of broker-dealers. B. Introducing firms can also directly engage with clients, but they do not handle the securities directly. They act as intermediaries between the client and the clearing firm. D. Clearing firms can transact in a wide range of securities, including options and futures, not just limited to these types. Therefore, this option is incorrect as it does not accurately describe the role of a clearing firm.