General Securities Sales Supervisor (Series10) Practice Exam

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What is the status of soft dollar remuneration under FINRA rules?

  1. Prohibited

  2. Permitted

  3. Permitted only if research analysts are registered

  4. Permitted only if research reports are public

The correct answer is: Permitted

Under FINRA rules, soft dollar remuneration is permitted. This practice allows broker-dealers to receive compensation in the form of research services from third-party providers in exchange for directing client trades to those brokers. The key aspect of this arrangement is that it must ultimately benefit the client by providing valuable research that aids in the decision-making process for their investments. While there are specific requirements and disclosures that must be made regarding soft dollar arrangements, the core allowance of these practices highlights the regulatory framework's recognition of the value of research services in enhancing the investment strategies pursued by clients. Thus, as long as these arrangements comply with the regulatory standards set forth, they are permissible within the industry.

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