Laws & RegulationsQuestion 34 of 100
An adviser engages in an agency cross transaction, arranging a trade between two of its advisory clients. To do this properly, the adviser generally must:
a.Never disclose the arrangement
b.Charge a performance fee
c.Guarantee both clients a profit
d.Obtain client consent, disclose its role and any compensation, and not recommend the transaction to both sides
Explanation
Agency cross transactions require written client consent, disclosure of the adviser's role and compensation, and the adviser generally may not have recommended the trade to both parties. These safeguards address the conflict of representing both sides. Annual statements of cross transactions are also required.
Law Reference: Investment Advisers Act of 1940Practice all 100 questions free — no signup required.
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