Exploring Agency Transaction (Securities): A Comprehensive Guide

Q: How does a broker earn money in an agency transaction?

The broker earns a commission based on the transaction value.

Q: What is the difference between agency and principal transactions?

In agency transactions, the broker does not own the securities, whereas in principal transactions, the broker trades for their own account.

Definition & Meaning

An agency transaction in securities refers to a situation where a broker acts solely as an intermediary between a buyer and a seller. In this role, the broker facilitates the transaction but does not take ownership of the securities being traded. Instead, they earn a commission for their services. This contrasts with principal transactions, where the broker trades securities for their own account, acting as the principal in the transaction.

Table of content

Legal Use & context

Agency transactions are primarily used in the context of securities trading and investment. They are relevant in various legal practices, including financial regulation and commercial law. Users may encounter agency transactions when dealing with brokers or financial intermediaries, and understanding this term is crucial for anyone engaged in buying or selling securities. Legal forms related to agency transactions can help users navigate these processes effectively.

Key legal elements

Real-world examples

Here are a couple of examples of abatement:

Example 1: A retail investor wants to purchase shares of a company. They contact a broker who finds a seller for those shares. The broker facilitates the transaction, earning a commission for their service.

Example 2: A financial institution acts on behalf of a client to sell bonds. The institution connects with potential buyers, completing the sale without taking ownership of the bonds themselves. (hypothetical example)

Comparison with related terms

Term	Definition	Key Difference
Agency Transaction	A broker acts as an agent for buyers and sellers.	Broker does not own the securities.
Principal Transaction	A broker trades securities for their own account.	Broker takes ownership of the securities.

Common misunderstandings

What to do if this term applies to you

If you are considering engaging in an agency transaction, ensure you understand the role of your broker and the fees involved. You can explore US Legal Forms for templates that can assist you in documenting your transactions. If your situation is complex, it may be wise to consult a legal professional for tailored advice.

Find the legal form that fits your case

Browse our library of 85,000+ state-specific legal templates.

This field is required

Quick facts

Attribute	Details
Typical Fees	Commission based on the transaction value.
Jurisdiction	Federal and state securities laws apply.
Ownership	Broker does not own the securities.