Supervising Compensation Practices Flashcards
True / false: a RR may conduct BD services on the premises of a financial institution (bank)
True
True / false: a client may conduct securities and banking activities in the same area (e.g., desk) of shared premises
false - need physical separation and proper signage
What is included in the required disclosure to a customer re relationship between bank and the BD (3 things)?
1) that the BD is not FDIC insured
2) No deposit loss guarantee
3) subject to investment risk (inc. loss of principal)
When (and in what form) must customer disclosures re bank / BD relationship be made?
must be given to customers both written AND orally
Must be given at or prior to opening of brokerage account
What is the SEC standard of conduct requiring BDs and their APs to act in their customer’s best interest when recommending transactions in securities
Reg BI (Best Interest)
Under what circumstances are retired or deceased RR allowed to continue receiving commissions (trail commissions)?
Must be established in an agreement between the BD and the retired RP at or before retirement or death; in case of death can be designated to a beneficiary / estate
What is the $ limit per year on client gifts?
$100 per individual per calendar year unless firm calculates year differently per its WSPs
True / false: entertainment limited by the $100 client gift rule
false - ordinary and usual business entertainment is not considered a gift PROVIDED the AP attends the event alongside client
What are two exceptions to the $100 client gift rule?
1) personal gifts (wedding, bereavement, etc) so long as firm does not pay or reimburse for it / it’s connected with business
2) “de minimis” gifts (i.e. swag and branded items)
True / false: charitable giving is not allowed under the gift limit rules
False - charitable giving is allowed but CANNOT be based on prior or expected amounts of business
Rules must be established in the WSPs
How BDs may use rankings of mutual fund performance in retail communications
BDs may use rankings created by INDEPENDENT ranking entities (e.g., Morningstar) or they may use their own rankings , provided they are based on measures of an independent entity
How are gifts subject to $100 limit valued
higher of cost or current market value
