Series 7 practice questionmediumReferral Programs — Permitted Compensation
A registered representative wishes to compensate a non-registered individual for referring a high-net-worth client to the broker-dealer. Which of the following is permitted under FINRA rules?
- AProvide tickets to an exclusive sporting event valued at $500.
- BOffer a recurring monthly payment based on the client’s account size.
- CCompensate the individual with a one-time nominal gift, such as a $75 gift card.✓ Correct answer
- DPay the individual a percentage of the referred client’s trading commissions.
Explanation
Why C — Compensate the individual with a one-time nominal gift, such as a $75 gift card.
FINRA permits non-cash compensation to non-registered individuals only if it is a nominal, one-time gift valued at no more than $100 per year. Ongoing or transaction-based compensation is not allowed.
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