Series 63 practice questionhardUnreasonable Commissions
A broker-dealer in State Z charges commissions significantly above industry norms but discloses all fees to clients. Under the USA, is the broker-dealer compliant?
- ANo, because commissions must be reasonable even if disclosed✓ Correct answer
- BYes, disclosure is sufficient
- CYes, with Administrator approval
- DNo, unless the firm is a federal covered advisor
Explanation
Why A — No, because commissions must be reasonable even if disclosed
Per USA Section 402, broker-dealer compensation must be both reasonable and disclosed. Excessive commissions are prohibited, regardless of disclosure or Administrator approval.
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