Question

Joe and Mike have been friends since college and both work in the financial industry. The two work for two un-affiliated broker/dealers and Mike calls Joe to let him know that he may not meet his quota for sales unless he gets some new customers. If he fails to meet his quota, he will lose his job. Joe has done very well and sends some of his clients over to Mike in an attempt to help Mike out. Mike agrees to split all commissions on sales from these clients, since Joe has done him a favor. Which of the following most accurately describes how the NASAA might classify this type of arrangement?

A. Because Joe and Mike work for un-affiliated broker/dealers, they are not permitted to share or split commissions, making this arrangement un-acceptable.
B. As long as Mike makes the appropriate dis-closures to these new clients with regard to the splitting of commissions with Joe, the arrangement is acceptable.
C. Because splitting of commissions is never permitted under any circumstances, this arrangement is un-acceptable.
D. As long as Mike discloses the arrangement to his firm, the arrangement is acceptable.

Answer 1

A) Because Joe and Mike work for un-affiliated broker/dealers, they are not permitted to share or split commissions, making this arrangement un-acceptable.

Step-by-step explanation:

Even though Joe and Mike are friends and know each other for a long time, in the real world where money has an almost divine status, they must follow the rules. Commissions can only be split between agents that work for the same broker-dealer firm and are registered to work in the same state.

Since Joe and Mike work for unaffiliated broker-dealers, they cannot share clients or split commissions. Following the rules will not only help them professionally, but probably will help their friendship.