Gutierrez sells insurance-based securities to investors seeking long-term stable income investments. Gutierrez enters into agreements with several local financial planners to refer clients to him as part of their investment advice. Gutierrez: a) Has violated the Code and Standards by entering into a referral arrangement of this type. B) Has violated the Code and Standards if he does not inform investors of these referral arrangements. C)Has not violated the Code and Standards since investors would likely have made investments in these types of securities without being specifically referred to Gutierrez. D)Has not violated the Code and Standards as the financial planners, not Gutierrez, are required to disclose the referral arrangements. why d is a wrong answer> as Gutierrez is not the one who receive referral fee? thanks alot…
B. He is still entitled to disclose any referral arrangement and possible conflicts of interest. He is receiving clients (management fees!) from those financial planers. Hence he’s benefiting from the arrangement and should disclose this to clients.
Answer is B, no clear details given on the arrangement, if they were, answer would be different.
As a member, Gutierrez has to ensure that investors know they’ve been referred and that compensation has been made to the referrer. Both Gutierrez and the planners SHOULD be telling the investors, but as a member of the institute, Gutierrez has a responsibility to unsure he’s done all he can to make sure they know.
When do you need not disclose referral fees? As the person making the reference or the person receiving?
BUMP B Disclose, disclose, disclose