Conflicts of Interest - VI(C) Referral Fees

LOS

a. demonstrate the application of the Code of Ethics and Standards of Professional Conduct to situations of issues involving issues of personal integrity

b. distinguish between conduct that conforms to the Code and Standards and conduct that violates the Code and Standards

c. recommend practices and procedures designed to prevent violations of the Code of Ethics and Standards of Professional Conduct

What is the primary directive of Standard VI(C) Referral Fees? Members and Candidates must disclose to their employers, clients, and prospective clients, as appropriate, any compensation, consideration, or benefit received by or paid to others for the recommendation of products or services.

What benefit does the client receive when you disclose referral fees? Disclosure should help the client evaluate any possible partiality shown in any recommendations of services as well as evaluate the full cost of services.

What three rules should you keep in mind regarding disclosure of referral fees? 1. Disclose the existence and terms of any referral fee agreements to all clients or prospects who have been referred under such agreements. 2. Describe the nature of the consideration and its estimated dollar value in this disclosure. Consideration includes all fees, whether paid or not (in cash, in soft dollars, or in kind). 3. Consult a supervisor and legal counsel concerning any prospective arrangement regarding referral fees.