What type of firm is a broker dealer?

A broker-dealer is a firm that engages in the buying and selling of securities, either on behalf of clients or for its own account. This explains why the correct answer is that a broker-dealer is characterized as a firm that buys and sells securities for clients.

Broker-dealers play a crucial role in facilitating transactions within the financial markets by acting as intermediaries between buyers and sellers. They can execute trades, provide market information, and offer advisory services to clients. This dual function of handling client assets as well as potentially trading their own inventory sets them apart within the financial services sector.

In contrast, other types of firms mentioned in the choices do not accurately represent the primary role of a broker-dealer. A financial institution could encompass a range of entities, including banks and credit unions, which may not specifically engage in the buying and selling of securities. A firm that issues bonds typically refers to entities that create debt instruments for funding, differing from the broker-dealer's role. Lastly, a non-profit organization does not align with the for-profit nature of broker-dealers, which exist primarily to generate profit through the transactions they facilitate.