Certified Financial Management Specialist Practice Exam

Which type of company facilitates buying and selling of securities?

1. Insurance Companies

2. Brokerage Firms

3. Credit Unions

4. Investment Funds

The correct answer is: Brokerage Firms

Brokerage firms play a crucial role in the financial markets as intermediaries that facilitate the buying and selling of securities. They serve as the link between buyers and sellers, enabling individuals and institutional investors to trade stocks, bonds, and other financial instruments. When investors want to buy or sell securities, they typically use brokerage firms to execute these trades on exchanges where securities are listed. Brokerage firms provide various services, including market research, investment advice, and access to trading platforms. They can charge commissions or fees for their services, which can vary based on the type of trade or account held by the investor. In contrast, insurance companies primarily focus on risk management and protection through policies, credit unions are member-owned financial cooperatives primarily engaged in savings and loan services, and investment funds pool together capital from multiple investors to invest in a diversified portfolio of assets. While these other entities play important roles in finance, they do not specifically facilitate the direct buying and selling of securities like brokerage firms do.