Series 7: 11.3.3 Member Compensation

11.3.3  Member Compensation

Compensation received for the sale and distribution of pooled investment vehicles, such as variable annuities, mutual funds, and DPPs, is strictly regulated to discourage brokers from selling an issuer or sponsor’s product against their customers’ best interests.

In connection with the sale and distribution of pooled investment vehicles, no associated person may accept any compensation from anyone other than his employer, unless all of the following conditions apply:

• • The arrangement is agreed to by the member firm.
• • Payment to associated persons is treated as compensation to the member firm.
• • The member firm relies on SEC rules appropriate to the specific arrangement.
• • The member firm maintains records of all compensation received from the issuer or sponsor who offers it, which must include: their names, the names of the associated persons, the amount of cash paid, and the nature and value of the non-cash compensation made, if any.

Firms and associated persons selling investment company securities (such as mutual fund shares) or variable contracts (such as v