LLQP Ethics & Professional Practice · Component 2.2 · 40% of the exam
An unlicensed acquaintance offers to send clients to an agent in return for a share of the commission. The agent should:
- Aagree, since paying for referrals is an ordinary and accepted business expense
- decline, because commission may generally be shared only with appropriately licensed people
- Cagree provided the share is small and the clients are told about the arrangement
- Dagree and record the payment in the books as advertising rather than as a commission split
Correct answer: B) decline, because commission may generally be shared only with appropriately licensed people
Sharing commission with an unlicensed person is generally prohibited because it rewards unlicensed activity. A modest referral fee may be permitted in some jurisdictions, so the local rules must be checked and any arrangement disclosed.
Why the other options are wrong
- ACommission sharing with unlicensed persons is restricted by legislation.
- CThe size of the share does not make an impermissible split acceptable.
- DRecharacterizing the payment does not change what it is.
Exam tip
Commission is shared with licensed people; check local rules on referral fees.
Common mistake
Paying a commission split to an unlicensed introducer.
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.