According to Richard Chen, RIAs are still making these 3 common mistakes when it comes to client referral arrangements.
1. SEC-registered advisers who pay parties more than $1,000 per year for referrals are sometimes not considering communications made by those referring parties as their own advertisements that are subject to the SEC Marketing Rule. 2. RIAs are not vetting referral sources to ensure they are not statutorily disqualified (i.e., subject to certain criminal or regulatory sanctions).
3. RIAs are still utilizing parties to refer clients for compensation even if those referring parties are not appropriately registered as investment adviser representatives in the states where they are soliciting clients.
