Series 7 practice questionmediumReferral Programs — Written Agreements
A broker-dealer wants to compensate a third-party firm for client referrals. What documentation is required to comply with FINRA rules?
- ANo documentation is necessary if the compensation is nominal.
- BA written agreement must be established detailing the terms and compensation.✓ Correct answer
- COnly a verbal notification to compliance is needed.
- DAn oral agreement is sufficient if witnessed by both parties.
Explanation
Why B — A written agreement must be established detailing the terms and compensation.
FINRA mandates a written agreement for referral arrangements to ensure all terms and compensation are clearly documented and reviewed for compliance.
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