What must accompany a registered person's participation in private security transactions for it to be compliant?

What must accompany a registered person's participation in private security transactions for it to be compliant?

• A. Verbal approval from the customer
• B. Written approval from the broker-dealer
• C. A formal application to the SEC
• D. An acknowledgment form signed by the client

Answer: (B)

A registered person must ensure that their participation in private security transactions is compliant by obtaining written approval from their broker-dealer. This requirement is in place to maintain oversight and ensure that the broker-dealer is aware of and agrees to the transaction, as it can involve risks that may not be disclosed to them otherwise. Written approval serves as a form of accountability and documentation, ensuring that the financial institution is keeping track of outside activities that could potentially conflict with its interests or regulatory obligations. While other options may involve some level of communication or acknowledgment, they do not fulfill the compliance need that arises from the regulatory framework that governs broker-dealers and their registered persons. For instance, verbal approval lacks the permanence and traceability of written consent, and while an acknowledgment form signed by the client could serve to inform, it does not address the broker-dealer's responsibility. A formal application to the SEC is not typically required for private transactions, making it less relevant in this context. Thus, written approval from the broker-dealer is essential for compliance with regulatory standards in private security transactions.

A registered person must ensure that their participation in private security transactions is compliant by obtaining written approval from their broker-dealer. This requirement is in place to maintain oversight and ensure that the broker-dealer is aware of and agrees to the transaction, as it can involve risks that may not be disclosed to them otherwise. Written approval serves as a form of accountability and documentation, ensuring that the financial institution is keeping track of outside activities that could potentially conflict with its interests or regulatory obligations.

While other options may involve some level of communication or acknowledgment, they do not fulfill the compliance need that arises from the regulatory framework that governs broker-dealers and their registered persons. For instance, verbal approval lacks the permanence and traceability of written consent, and while an acknowledgment form signed by the client could serve to inform, it does not address the broker-dealer's responsibility. A formal application to the SEC is not typically required for private transactions, making it less relevant in this context. Thus, written approval from the broker-dealer is essential for compliance with regulatory standards in private security transactions.