FISD FIA Module 1 Practice Test 2026 – Complete Exam Preparation

At the heart of this distinction is who takes the risk and whose money is being put at stake. A proprietary trader operates with the firm’s own capital, buying and selling to profit for the firm; they act as the principal in the trade, so the firm bears the market risk and the potential reward. An agency broker, by contrast, executes orders on behalf of clients and earns commissions or fees for facilitating those trades. They do not hold the client’s risk themselves, since the client’s order is the one that ultimately trades in the market.

That’s why the correct choice states that a proprietary trader acts as the principal in a deal while an agency broker acts on behalf of a client. The other statements describe traits that aren’t defining differences: asset class focus and trading frequency can vary for either role, and proprietary traders do take on risk rather than avoiding it.