Chartered Institute of Stockbrokers (CISI) Professional Practice Exam

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How do private investors typically purchase investment trust shares in the secondary market?

Through an online brokerage account
Directly from the company
Through a stockbroker or financial intermediary
At public auctions

The correct answer is: Through a stockbroker or financial intermediary

Private investors typically purchase investment trust shares in the secondary market through a stockbroker or financial intermediary. This method allows investors to buy shares that are already issued and traded among investors rather than purchasing new shares directly from the company. When investors seek to acquire shares in the secondary market, they rely on brokers or financial services that facilitate these transactions, ensuring they have access to the market prices and can execute trades efficiently. Stockbrokers are equipped with tools and resources necessary for managing the specifics of trades, including market analysis and order execution, which is especially important in active and competitive markets. While online brokerage accounts are a common method for individuals to trade stocks, they still fall under the broader category of using a financial intermediary. It is essential to recognize that direct purchases from the company and public auctions are not the standard practices for buying investment trust shares in the secondary market; these methods are not typically utilized for this type of investment.