{"id":38894,"date":"2021-12-08T08:25:53","date_gmt":"2021-12-08T08:25:53","guid":{"rendered":"https:\/\/analystprep.com\/cfa-level-1-exam\/?p=38894"},"modified":"2026-08-27T18:36:24","modified_gmt":"2026-08-27T18:36:24","slug":"standard-vic-referral-fees","status":"publish","type":"post","link":"https:\/\/analystprep.com\/cfa-level-1-exam\/ethical-and-professional-standards\/standard-vic-referral-fees\/","title":{"rendered":"Standard VI(C) \u2013 Referral Fees"},"content":{"rendered":"\n<script type=\"application\/ld+json\">\n{\n  \"@context\": \"https:\/\/schema.org\",\n  \"@type\": \"QAPage\",\n  \"mainEntity\": {\n    \"@type\": \"Question\",\n    \"name\": \"Phillip Evans is a portfolio manager at Bridging Finance Corporation. Evans has routinely asked the trading desk to direct a small portion of its trading activity to Jaystar Brokerage, a mid-size broker\/dealer headed by his brother-in-law. Jaystar\u2019s commissions are above the industry average, and the traders find the research provided to be uninformative. Evan\u2019s brother-in-law reciprocates this arrangement by frequently recommending Bridging Finance Corporation and Evans to all his clients. This arrangement is not disclosed to his employer or clients referred to by Jaystar Brokerage. Has Evans violated Standard VI(C) \u2013 Referral Fees?\",\n    \"text\": \"Options:\\nA. Yes, because he fails to disclose the nature and value of the referral arrangement to his employer.\\nB. No, because his brother-in-law reciprocates by referring his clients to Bridging Finance Corporation.\\nC. No, because he is prohibited from receiving any referral compensation.\",\n    \"answerCount\": 1,\n    \"acceptedAnswer\": {\n      \"@type\": \"Answer\",\n      \"text\": \"The correct answer is A. Evans violated Standard VI(C) \u2013 Referral Fees because he failed to disclose the nature and value of the referral arrangement to his employer and the clients involved. Referral arrangements are not prohibited under the standard, but CFA members must provide full and timely disclosure of any compensation or benefit received or paid for referrals. Evans\u2019 failure to disclose the relationship with Jaystar Brokerage creates a conflict of interest that prevents informed evaluation by his employer and clients.\"\n    }\n  }\n}\n<\/script>\n\n\n\n<p class=\"wp-block-paragraph\">Members and Candidates must disclose any remuneration, consideration, or advantages received from or provided to anyone to recommend products or services to their employer, clients, and prospective clients, as applicable.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>Application 1: Disclosure of Interdepartmental Referral Agreements<\/strong><\/h4>\n\n\n\n<p class=\"wp-block-paragraph\">Britney Sullivan works in the research department at Zeus Investment Bank. She receives compensation for each referral to the brokerage department that results in any trading activity. She refers numerous clients to the brokerage department at Zeus Investment Bank but fails to disclose this arrangement to her clients.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Has Sullivan violated Standard VI(C) \u2013 Referral Fees?<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li>No, because she only needs to disclose referral arrangements to her employer.<\/li>\n\n\n\n<li>No, because the referral arrangements and payments are made within the firm.<\/li>\n\n\n\n<li>Yes, because she did not disclose the referral arrangements to her clients.<\/li>\n<\/ol>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Solution<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The correct answer is <strong>C<\/strong>.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Sullivan has violated Standard VI(C) \u2013 Referral Fees by failing to disclose the referral arrangement at Zeus Investment Bank. Standard VI(C) \u2013 Referral Fees does not distinguish between compensation paid to external or internal referees. Members and Candidates must disclose&nbsp;<em>all<\/em>&nbsp;referral compensation. Therefore, Sullivan is required to disclose the internal referral compensation in place at the point of referral. The disclosure must include the&nbsp;<em>amount&nbsp;<\/em>and&nbsp;<em>nature<\/em>&nbsp;of the compensation.<\/p>\n\n\n\n<div style=\"margin: 18px 0;\">\n  <a href=\"https:\/\/analystprep.com\/free-trial\/\"\n     target=\"_blank\"\n     rel=\"noopener noreferrer\"\n     style=\"display: block; text-align: center; padding: 14px 18px; border: 2px solid #1a73e8; border-radius: 18px; color: #ffffff; font-weight: 600; font-size: 16px; text-decoration: none; background-color: #1a73e8;\">\n    Master referral fees ethics with our Free Trial.\n  <\/a>\n<\/div>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>Application 2:&nbsp;Disclosure of Referral Arrangements and Informing Firm<\/strong><\/h4>\n\n\n\n<p class=\"wp-block-paragraph\">Phillip Evans is a portfolio manager at Bridging Finance Corporation. Evans has routinely asked the trading desk to direct a small portion of its trading activity to Jaystar Brokerage, a mid-size broker\/dealer headed by his brother-in-law. Jaystar&#8217;s commissions are above the industry average, and the traders find the research provided to be uninformative. Evan&#8217;s brother-in-law reciprocates this arrangement by frequently recommending Bridging Finance Corporation and Evans to all his clients. This arrangement is not disclosed to his employer or clients referred to by Jaystar Brokerage.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Has Evans violated Standard VI(C) \u2013 Referral Fees?<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li>Yes, because he fails to disclose the nature and value of the referral arrangement to his employer.<\/li>\n\n\n\n<li>No, because his brother-in-law reciprocates by referring his clients to Bridging Finance Corporation.<\/li>\n\n\n\n<li>No, because he is prohibited from receiving any referral compensation.<\/li>\n<\/ol>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Solution<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The correct answer is <strong>A<\/strong>.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Evans has violated Standard VI(C) \u2013 Referral Fees by failing to inform his employer of the referral arrangement. Evans must disclose the nature and value of the referral arrangements to his employer; conversely, his brother-in-law must disclose the arrangement to his clients. Standard VI(C) \u2013 Referral Fees does not prohibit any referral compensation; however, full and timely disclosures are required.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">&nbsp;<\/h2>\n\n\n\n<div style=\"text-align: center; margin: 30px 0;\">\n  <a href=\"https:\/\/analystprep.com\/free-trial\/\"\n     target=\"_blank\"\n     rel=\"noopener noreferrer\"\n     style=\"display: inline-flex; align-items: center; justify-content: center; padding: 12px 26px; border-radius: 9999px; background: #1e5bd8; color: #ffffff; font-weight: bold; text-decoration: none;\">\n    Start Free Trial \u2192\n  <\/a>\n  <p style=\"margin-top: 12px; font-size: 1.5; line-height: 1.5;\">\n    Master CFA Standard VI(C) requirements, referral fee disclosures, compensation arrangements, and ethical obligations with our study materials and practice tools.\n  <\/p>\n<\/div>\n\n\n\n<p class=\"wp-block-paragraph\"><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Members and Candidates must disclose any remuneration, consideration, or advantages received from or provided to anyone to recommend products or services to their employer, clients, and prospective clients, as applicable. Application 1: Disclosure of Interdepartmental Referral Agreements Britney Sullivan works&#8230;<\/p>\n","protected":false},"author":15,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[3],"tags":[],"class_list":["post-38894","post","type-post","status-publish","format-standard","hentry","category-ethical-and-professional-standards","blog-post","no-post-thumbnail","animate"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v28.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Standard VI(C) Referral Fees | AnalystPrep CFA Notes<\/title>\n<meta name=\"description\" content=\"Learn CFA Standard VI(C) Referral Fees, including disclosure requirements, compensation rules, and key exam concepts for Level 1.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" 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