What function do segregated securities serve in a dealer's operations?

What function do segregated securities serve in a dealer's operations?

• A. Provide liquidity
• B. Facilitate secondary trading
• C. Lock away client-owned securities
• D. Enhance investment returns

Answer: (C)

Segregated securities serve a specific purpose in a dealer's operations by ensuring that client-owned securities are held securely and separately from the dealer's own assets. This means that client assets are protected from any potential claims against the dealer in the event of insolvency or legal issues. By locking away these securities, the dealer helps to maintain client trust and regulatory compliance, ensuring that clients' investments are safeguarded and accessible when needed. This segregation is crucial for maintaining the integrity of client accounts and for fostering a secure trading environment.

While providing liquidity and facilitating secondary trading are important functions in a dealer’s operations, they are not the primary role of segregated securities. The enhancement of investment returns is also not relevant in this context, as segregated securities focus more on protection and security rather than directly influencing performance or returns.