Sharing in Profits and Losses
Chapters in this video
What this video covers
- Why customer consent alone is never enough to share in profits or losses, and why the broker-dealer must also provide written authorization
- How the two written authorizations work together to protect the customer from conflicts of interest and the firm from rogue agent risk
- What the Financial Industry Regulatory Authority (FINRA) proportionality requirement adds: an agent must contribute their own capital to share proportionally in gains
- How sharing in an account's performance differs fundamentally from commission splitting in purpose, rule source, and legal requirements
- Why commission splitting requires the other person to be a registered agent for the same broker-dealer (BD) or a BD under common control
- Why splitting a commission with any unregistered person is strictly prohibited, regardless of how the lead was sourced
- How to recognize exam scenarios that mention only one authorization, only customer enthusiasm, or only a notarized letter as prohibited sharing arrangements
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