Cash Referral Fees

The flashcards below were created by user Anonymous on FreezingBlue Flashcards.

  1. What are the rules for cash referral fees from the IAs to solicitors?
    • Cash referral fees to solicitors are allowed,
    • if:
    • -  the IA is registered or exempt from registration with the SEC;
    • -  the solicitor is not subject to statutory disqualification;
    • -  there is a contract between the IA and the solicitor,
    • but only if:
    • -  they are paid for impersonal advisory services;
    • -  to a person affiliated with the IA or
    • -  to a third-party not affiliated with the IA,
    • so long as:
    • -  the arrangement between IA and third-party solicitor is disclosed (typically via a separate solicitor brochure);
    • -  any script or sales approach is the responsibility of the advisor.
  2. How should disclosure of referral fees be handled under the SEC rules (IAA 1940)? 
    • Failure to disclose violates the act;
    • The amount and basis of the fee must be disclosed including a statement that the fee is generated because of the referral.
  3. What are the rules for cash referral fees from the IAs to solicitors under the USA?
    Much simpler, anyone who solicits on behalf of an IA mus be registered as an IAR.
  4. What are permitted cash referrall fees under IAA 1940 and USA?
    Referral fees paid to an attorney, CPA, insurance broker in the form of a nominal fee as a thank you.  Paying a fee based on the size of a client's account or for managing that account is prohibited.
Card Set:
Cash Referral Fees
2012-06-15 19:52:17
Cash Referral Fees

Cash Referral Fees under IAA 1940
Show Answers: