SIE (Securities Industry Essentials) Practice Exam

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In the business of underwriting, when a firm adopts a firm commitment, it acts as a:

Broker
Dealer
Custodian
Advisor

The correct answer is: Dealer

In the business of underwriting, when a firm adopts a firm commitment, it acts as a dealer. This means that the firm purchases securities from the issuing company and then resells them to investors at a higher price, making a profit from the difference. Therefore, options A, C, and D are all incorrect as they do not accurately describe the role of a dealer in underwriting. A broker simply facilitates the buying and selling of securities between investors, while a custodian holds and safeguards assets on behalf of clients. An advisor may provide guidance and recommendations for investments, but does not have the direct role of a dealer in the underwriting process.