When a broker-dealer sells a security to a client and charges a commission, how is the broker-dealer acting?

When a broker-dealer sells a security to a client and charges a commission, it is acting as an agent. In this scenario, the broker-dealer facilitates the transaction between the buyer and seller, which is characteristic of an agent’s role. The agent's responsibility is to represent the interests of the client, working to find a suitable transaction for them while earning a commission for their services. The commission reflects their role in assisting the client rather than taking ownership of the securities themselves.

In contrast, a principal transaction would involve the broker-dealer buying the security themselves and then selling it to the client while taking on the risk of price fluctuations. Acting as a dealer would apply when the broker-dealer is buying and selling securities for their own account, not for a client's interests or charges. A counterparty refers to the other party involved in a transaction but does not define the role of the broker-dealer in the context of selling security with a commission. Therefore, the action of selling a security while charging a commission firmly places the broker-dealer in the agent category.