Series 63 practice questionmediumInvestment Adviser Representatives — Compensation and Activities
During a registration workshop, the instructor adds this setup first. Read it as a Uniform Securities Act issue rather than a federal-law issue. Paul is a registered investment adviser representative in State M. He is offered a fee by a mutual fund company for each client he refers to the fund. According to the Uniform Securities Act, what must Paul do before accepting such compensation?
- ADisclose the arrangement to the client in writing before making the recommendation.✓ Correct answer
- BAccept the fee as long as he is already registered as an IAR.
- CRefuse the compensation, as it is always prohibited for IARs.
- DSeek approval from the State Administrator before accepting the fee.
Explanation
Why A — Disclose the arrangement to the client in writing before making the recommendation.
The USA requires investment adviser representatives to disclose all material conflicts of interest, including compensation arrangements, to clients in writing prior to making recommendations (USA Section 404). This version tests the same concept with a different fact pattern wrapper.
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