An agent suggests using soft dollars to reimburse a client’s legal expenses related to a securities complaint. Which best describes the compliance risk under the USA?

1. AIt is permissible if the amount is immaterial
2. BIt is a violation because soft dollars cannot be used for client reimbursements✓ Correct answer
3. CCompliance risk only if the client is an accredited investor
4. DPermissible if disclosed in advance

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