The Securities Litigation Expert Blog

Specialist Suitability Obligations - Working with Clients

Posted by Jack Duval

Dec 6, 2013 7:03:00 AM

This blog post continues our expert analysis of broker-dealer specialists and specialist suitability obligations when interacting with clients.  In this post, we explain the basics of selling agreements which are common for broker-dealers with investment managers and insurance carriers.

Selling Agreements

Since outside specialists are not on the Broker-Dealer ("BD") payroll, there necessarily exists a selling agreement between their third party employer/issuer and the BD. A closer look at the usual language found in a selling agreement is an important step to understanding the relationship between the outside specialist, their firm, and the BD. A typical selling agreement will included the following elements:

  • Compensation arrangements, including specific disclosure of gross commissions generated (by product or service) and percentage splits;
  • The basis for commission reversals;
  • Venue for dispute resolution in the event of a material disagreement;
  • Term and length of contract;
  • Conditions pertaining to appointment of representatives to sell their products.

For a chart that illustrates the interaction of both inside and outside specialists with the BD, representative, and client, see the link to our white paper "Suitability Obligations When Using Specialists", below.

 Specialist suitability expert John Duval, Sr. and CEO Jack Duval have written a white paper on specialist suitability obligations.  It can be accessed here.

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Topics: broker-dealer specialist system, specialists suitability, selling agreement

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