A registered representative at another member firm has a client who wishes to buy a Direct Participation Program (DPP) unit, a product that is not offered through his firm. He has a friend that is a registered representative at another member firm where DPPs are sold, and offers to refer the prospective client in exchange for a small fee. Which statement is TRUE?

A. This is permitted since the referral payment is small

B. This is permitted because the recipient of the referral fee is a registered individual

C. This is permitted as long as the client is informed that a referral fee has been paid

D. This is prohibited

Question

Gill

Business

29 July, 17:47

A registered representative at another member firm has a client who wishes to buy a Direct Participation Program (DPP) unit, a product that is not offered through his firm. He has a friend that is a registered representative at another member firm where DPPs are sold, and offers to refer the prospective client in exchange for a small fee. Which statement is TRUE?

A. This is permitted since the referral payment is small

B. This is permitted because the recipient of the referral fee is a registered individual

C. This is permitted as long as the client is informed that a referral fee has been paid

D. This is prohibited

+1

Answers (1)

Know the Answer?

Emmett Small · Answer 1

D. This is prohibited

Explanation:

Note that, the term 'registered representative' applies to an individual who works for a brokerage company and who serves as representative for clients trading investment products such as stocks or bonds.

Thus, according to regulations such registered representative is prohibited to perform such exchange, and can only share commissions or pay referral fees to other registered persons at the same broker-dealer, since the friend works for different firms.