Series 63 practice questionmediumThird-Party Payments
A broker-dealer receives payments from mutual fund companies for promoting their funds. What must be done under the USA?
- ADisclose the payments to clients when recommending those funds✓ Correct answer
- BNo disclosure is required if the funds are also suitable
- CDisclose only if the client asks
- DObtain approval from the SEC
Explanation
Why A — Disclose the payments to clients when recommending those funds
Payments from third parties for product promotion represent a conflict of interest and must be disclosed under the USA (Section 402). Suitability or SEC approval does not remove the disclosure obligation.
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