Chapter 8 - Compensation

Question 1

Must communicate in writing if an IA or IAR is receiving compensation that

Answer 1

• is receiving fees, comp, commiss that is in addition to those previously communicated to the client
• is charging an advisory fee in addition to a commission, or vice versa

Question 2

BDs and agents can’t charge for ________ duties

Answer 2

miscellaneous

Question 3

BDs and agents can’t split or pay commissions to persons who are not _____ to sell that particular type of security

Answer 3

licensed

Question 4

Can’t split commissions with any agents that don’t work for the same ______ or a _____ under _____ control

Answer 4

BD, or a BD under common control

Question 5

“Soft dollar” arrangements are limited to:

Answer 5

• research publications
• electronic services that provide market data
• software that assist in investment analysis
• seminars for agents and reps on work-related topics
• custodial and clearing services

Question 6

“Soft dollar” arrangements CANNOT be

Answer 6

• overhead related expenses, such as office space, admin labor or furniture
• compensation for referrals
• salaries
• cell phones or computers
• anything that benefits the adviser but not the clients

Question 7

IAs who receive soft dollar services from BDs for using them to execute trades must ______ this to clients

Answer 7

disclose

Question 8

An IA can’t pay cash to a 3rd party for soliciting clients UNLESS

Answer 8

• solicitor has not been subject to SEC sanctions
• no felonies or misdemeanors in last 10 years
• no willful violation of securities law
• agreement between IA and 3rd party is in writing
• client must get IA brochure and separate solicitor disclosure
• client must sign that they have received IAs brochure and solicitor disclosure
• IA is responsible for supervising solicitor