In a scenario where a registered person sells partnership units not through their broker-dealer, which statement is TRUE?

In a scenario where a registered person sells partnership units not through their broker-dealer, which statement is TRUE?

• A. The transaction requires only verbal approval from the broker-dealer.
• B. The broker-dealer's written approval is not necessary.
• C. The broker-dealer must give written approval, and record the transaction.
• D. The representative must only inform the broker-dealer.

Answer: (C)

The correct choice indicates that the broker-dealer must give written approval, and the transaction must be recorded. This is essential in the context of regulatory compliance for registered persons who are part of a broker-dealer. When a registered representative sells partnership units outside of their broker-dealer, it falls under the regulations governing outside business activities and private securities transactions. The written approval from the broker-dealer is a critical requirement because it helps ensure that the broker-dealer is aware of all the activities the registered person is engaging in, which can impact compliance, supervision, and liability. Record-keeping is also vital since it provides an audit trail of the transaction, helping the broker-dealer to maintain compliance with regulatory mandates and internal policies. This oversight protects both the firm and the customer by ensuring that all sales activities are conducted under the appropriate regulations and that all necessary disclosures and reports are made as required.

The correct choice indicates that the broker-dealer must give written approval, and the transaction must be recorded. This is essential in the context of regulatory compliance for registered persons who are part of a broker-dealer.

When a registered representative sells partnership units outside of their broker-dealer, it falls under the regulations governing outside business activities and private securities transactions. The written approval from the broker-dealer is a critical requirement because it helps ensure that the broker-dealer is aware of all the activities the registered person is engaging in, which can impact compliance, supervision, and liability.

Record-keeping is also vital since it provides an audit trail of the transaction, helping the broker-dealer to maintain compliance with regulatory mandates and internal policies. This oversight protects both the firm and the customer by ensuring that all sales activities are conducted under the appropriate regulations and that all necessary disclosures and reports are made as required.