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← Series 63: Regulation of Broker-Dealers & Agents
Series 63 practice questionmediumDisclosure obligations in compensation

When must an agent at a broker-dealer specifically disclose to a client the existence of a soft dollar arrangement under the USA?

  1. AWhenever the soft dollar benefit is used to pay for tools that might indirectly benefit the client
  2. BOnly if the arrangement creates a material conflict of interest✓ Correct answer
  3. CNever, since soft dollar arrangements are an industry standard
  4. DOnly if the broker-dealer is also acting as an investment adviser
Explanation

Why B — Only if the arrangement creates a material conflict of interest

Disclosure is required when an arrangement creates a material conflict, per USA Section 406. A is too broad; C is incorrect as disclosure standards exist; D is untrue as both broker-dealers and investment advisers may need to disclose.

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