Referrals are often a significant source of new business for many RIAs. However, before entering into such arrangements, advisers should ensure they take proper steps to ensure those arrangements don\u2019t run afoul of applicable laws.<\/p>\n
First, make sure that the referring party is properly registered as an investment adviser representative, if applicable. Most states consider a person referring business to an RIA for compensation to be a \u201csolicitor\u201d that is required to register as an investment adviser representative with the state.<\/p>\n
Second, make sure the referring party is not statutorily disqualified (i.e., has been subject to criminal or regulatory sanctions) that would prevent them from making such referrals. In addition, the SEC\u2019s Marketing Rule requires that any \u201cpromoter\u201d providing any \u201cendorsement\u201d to an SEC-registered RIA must not be statutorily disqualified.<\/p>\n
Third, make sure that referred clients are\u00a0 notified of the arrangement to ensure they understand the conflicts of interest associated with the referral.<\/p>\n
Read more here<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":" Referrals are often a significant source of new business for many RIAs. However, before entering into such arrangements, advisers should ensure they take proper steps to ensure those arrangements don\u2019t run afoul of applicable laws. First, make sure that the referring party is properly registered as an investment adviser representative, if applicable. Most states consider … Continue reading RIA Client Referral Mistakes to Avoid<\/span>