Series 63 practice questionhardHard: ambiguous compensation structures
A broker-dealer charges both a fixed fee and per-transaction commissions within the same client account, but fails to provide clear invoices differentiating the two. What USA violation does this MOST LIKELY constitute?
- AFailure to supervise agents
- BImproper disclosure of compensation conflicts
- CUnethical business practices regarding compensation transparency✓ Correct answer
- DImproper registration of agent compensation plans
Explanation
Why C — Unethical business practices regarding compensation transparency
Section 406 requires clear, transparent disclosure of compensation. Failing to differentiate fees/commissions impairs client understanding and constitutes an unethical business practice. A and D are unrelated; B is too narrow.
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