General Securities Sales Supervisor (Series10) Practice Exam

Which type of securities requires disclosure of expected commissions in recommendations?

1. A Agency securities only

2. B Corporate securities only

3. C Municipal securities only

4. D It is not a requirement for any securities

The correct answer is: D It is not a requirement for any securities

The requirement for disclosing expected commissions in recommendations relates to the transparency and fairness in the securities industry, particularly in regards to the costs associated with investment products. In this context, the correct answer indicates that there are no specific regulations mandating the disclosure of expected commissions for any type of securities. In practice, while the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) encourage transparency, there aren't specific rules that require the disclosure of commissions for all securities. This may vary based on the nature of the transaction, the customer, and the type of firm providing the recommendations. Different types of securities—such as agency securities, corporate securities, and municipal securities—are subject to various reporting and disclosure obligations, but none necessitate explicit disclosure of expected commissions in the same way. Therefore, the emphasis here is on the lack of a universal requirement across all security types, validating that the answer aligns with industry standards and regulations. This underscores the importance for sales supervisors and representatives to understand their obligations regarding commission disclosure and maintaining trust with clients.