Can a broker-dealer act as both broker (agent) and dealer (principal) in the same transaction?

• A. Yes
• B. No
• C. Only with issuer approval
• D. Only for private placements

Answer: (B)

In this situation, a broker-dealer cannot act as both broker (agent) and dealer (principal) in the same transaction because it creates a direct conflict of interest with the client. When acting as an agent, the firm owes the client best execution and transparent disclosure of fees; when acting as a dealer, the firm is the counterparty and earns a markup or markdown. Doing both roles in one trade would let the firm profit from the sale while also claiming to act in the client’s best interest, making it difficult to ensure fair pricing and disclosure. If a firm must handle both sides, it should be in separate, clearly disclosed arrangements, not as a single dual-capacity transaction.