Disclosure of Compensation
Chapters in this video
- 0:00 When disclosure fails to cure outrageous fees
- 1:12 Trade confirmation rules for agency and principal capacity
- 2:29 Issuer affiliation disclosure before the contract trap
- 4:07 The golden rule: disclosure never cures unfair pricing
- 5:14 Commission splitting with unregistered persons
- 6:27 Investment adviser compensation in Form ADV Part 2A Item 5
- 7:21 Rapid-fire exam recap
What this video covers
- Whether agent or principal capacity must be disclosed on every trade confirmation, and why the exam uses false exceptions as bait
- How commission amounts appear on agency trade confirmations, and why markup or markdown is generally not separately disclosed on principal trades
- The exact timing for disclosing issuer affiliation: before entering the contract, with written follow-up only if the initial disclosure was verbal
- Why written disclosure after the contract is signed violates the affiliation rule, even if provided before settlement
- The golden rule that disclosure alone does not cure unfair pricing, and why client agreement to an excessive fee is still a violation
- The restriction on commission splitting with unregistered persons, regardless of how minor their role appeared
- What investment advisers must disclose in Form ADV Part 2A, Item 5: compensation method, non-client compensation sources, and sales compensation such as 12b-1 fees received by the adviser or a related person
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