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Series 7 practice questioneasyReferral Compensation — Permitted Recipients

Which referral-payment arrangement would generally create a registration problem under FINRA Rule 2040?

  1. AA nominal, fixed payment that is not tied to a securities transaction
  2. BTransaction-based compensation paid to an unregistered person for securities-account referrals✓ Correct answer
  3. CA permitted networking payment under a specific regulatory exception
  4. DA non-cash thank-you gift unrelated to whether the customer trades
Explanation

Why B — Transaction-based compensation paid to an unregistered person for securities-account referrals

FINRA Rule 2040 prohibits member firms from paying compensation to an unregistered person when receiving that compensation would require broker-dealer registration. Transaction-based referral compensation tied to securities accounts or trading activity is the classic registration problem; narrow nominal or fixed-payment exceptions are fact-specific.

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