Sharing in Profits and Losses
Chapters in this video
- 0:00 The Aaron and Iris scenario: customer consent alone
- 1:32 The Golden Rule of Two: customer plus broker-dealer
- 2:52 NASAA state law vs FINRA: the proportionality overlay
- 3:40 What proportionality actually caps
- 4:15 Commission splitting: a completely different rule
- 5:13 The unregistered person trap for commission splits
- 5:45 Aaron's exam day survival guide
- 6:14 What happens when agents go rogue: next video preview
What this video covers
- Why customer consent alone is never enough for an agent to share in profits or losses, and why two written authorizations are always required
- Who must provide the two written authorizations: the customer and the broker-dealer (BD)
- How state law under the North American Securities Administrators Association (NASAA) differs from Financial Industry Regulatory Authority (FINRA) rules on proportionality
- What proportionality means: an agent's share of gains and losses must match the agent's actual financial contribution to the account
- How sharing in profits and losses differs from commission splitting, and why customer permission is irrelevant for commission splits
- Who may receive a commission split: only registered agents at the same broker-dealer or an affiliated firm under common control
- Why splitting commissions with unregistered persons is strictly prohibited regardless of any other circumstances
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