LLQP Ethics & Professional Practice · Component 2.2 · 40% of the exam
An agent is offered a 'finder's fee' by a developer for referring clients to a real estate investment. The agent should:
- AAccept the fee in cash, since a cash payment keeps the arrangement separate from the agent's insurance business and its records
- BRefer clients without mentioning the fee, since the clients benefit from the introduction regardless of who pays
- CAccept the fee openly, since an introduction to a real estate investment is not insurance business
- Recognize an outside activity and conflict, possibly unregistered securities activity; disclose, get approval or decline
Correct answer: D) Recognize an outside activity and conflict, possibly unregistered securities activity; disclose, get approval or decline
Undisclosed referral fees for outside investments are a recurring source of discipline and client losses.
Why the other options are wrong
- AAccepting in cash is worse, not better.
- BQuiet referrals are concealment.
- CIt is a conflict and a possible securities breach.
Exam tip
Outside referral fees: disclose, approve or decline.
Common mistake
Steering clients to unregulated investments for referral fees.
What this tests
CISRO competency component 2.2 — Integrate into practice the rules governing the activities of life insurance agents — which is weighted at 40% of the Ethics & Professional Practice module. Written against the published curriculum.
More from component 2
- A prospective client wants to confirm that an agent is properly licensed before meeting him. She should:
- A dual-licensed agent's mutual fund business is reviewed following a client complaint. The review will be conducted by:
- Assuris coverage applies to:
- OLHI's services are available to:
- Complaints about an agent's conduct (as opposed to an insurer's claim decision) should be directed to:
- The best summary of an agent's ethical obligations is to:
Practice the whole Ethics & Professional Practice module
Timed sets weighted like the exam, and review of every question you miss. Free to start.