Client referrals between an IA and a BD must be disclosed and the services rendered must be provided for a cost that is what?

• A. Nominal cost
• B. Reasonable amount
• C. Market rate
• D. Free of charge

Answer: (B)

The key idea here is that referrals between an investment adviser and a broker-dealer must be disclosed to the client, and any compensation for the referral must be reasonable for the services actually provided. This protects the client from hidden incentives and ensures the referral arrangement doesn’t unduly influence the advice given. The fee should reflect the value of the work involved in the referral—time, expertise, and effort—not be arbitrary or inflated. A nominal or zero charge could obscure the value of the service, while market-rate fees may not always correspond to the specific services rendered in the relationship; the standard is a reasonable amount based on the actual services provided.