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CFA Level I Exam · Guidance for Standard VI: Conflicts of Interest

Standard VI(C) Referral Fees in CFA Level I

Updated 7 October 2026 · Fact-checked

Standard VI(C) requires members and candidates to disclose to their employer, clients and prospective clients any compensation or benefit they receive from, or pay to, others for recommending products or services. Disclosure must happen before the service is provided, so the client can judge the true cost and any partiality in the recommendation.

Understand Standard VI(C): Referral Fees

A referral fee is any payment or benefit given for sending business to someone else. It can be cash, a share of fees, gifts, or a favour in return. The money is not the problem. The problem is that it can quietly bend your advice.

Suppose you tell a client to use a particular broker or fund manager. The client assumes you picked it on merit. If you are paid for the recommendation, your interest may differ from the client's. The client cannot judge your objectivity unless you tell them.

Standard VI(C) answers this with disclosure. The standard reads: "Members and Candidates must disclose to their employer, clients, and prospective clients, as appropriate, any compensation, consideration, or benefit received from, or paid to, others for the recommendation of products or services."

There are two audiences. Your employer must know so it can assess whether the arrangement conflicts with your duties to it. Your clients and prospective clients must know so they can evaluate the motivation behind your recommendation and the total cost of the service. The rule covers both received and paid benefits, and it covers benefits that are not cash.

The disclosure should be made before the client enters into the service agreement, and it should describe the nature of the consideration. Vague wording is not enough. If the arrangement changes or a new one begins, disclose again.

Key formulas to remember

Standard VI(C) core duty
Disclose to employer, clients and prospective clients, as appropriate, any compensation, consideration or benefit received from, or paid to, others for recommending products or services
This is the official wording of the duty. Learn the key words: received or paid, and recommendation.
Who must be told
Employer + clients + prospective clients
Disclosure to the employer alone does not satisfy the duty to clients, and the reverse is also true.
Timing and content
Disclose before the service is provided, and state the nature of the consideration
Late or vague disclosure is a typical violation. The client must be able to evaluate the recommendation.
Scope of benefit
Cash or non-cash, direct or indirect, received or paid
Gifts, reciprocal referrals and fee splits all count if linked to recommending products or services.

How to solve Standard VI(C): Referral Fees questions

Use this method on any Standard VI(C) question. Most items test whether disclosure was made, to whom, and when.

  1. 1Identify whether anyone received or paid compensation or a benefit tied to a recommendation of a product or service.
  2. 2Check the form of benefit. Cash, fee sharing, gifts and reciprocal referrals all count.
  3. 3Check who was told: employer, clients, prospective clients. All relevant parties must be informed.
  4. 4Check the timing. Disclosure should come before the client agrees to the service, not after.
  5. 5Check the content. It must describe the nature of the benefit clearly enough for the client to judge the recommendation.
  6. 6Look at the member's action. If disclosure is missing, late, partial or to the wrong party, it is a violation.
  7. 7Choose the option that requires full and timely disclosure. Reject options that rely on the arrangement being small, legal or approved by one party only.

Quickest way: Three-check scan: Who, When, What

When to use it: Use it when you have about 90 seconds and the stem describes a referral arrangement or a benefit linked to a recommendation.

  1. Who: were employer and clients both informed?
  2. When: was disclosure made before the service began?
  3. What: was the nature of the benefit stated clearly?
  4. If any check fails, the member violated VI(C). The correct option is usually the one that adds the missing disclosure.
  5. Eliminate options that say disclosure is unnecessary because the amount is small, the referral is legal, or the recommendation was still suitable.

Common mistakes in Standard VI(C): Referral Fees

  • Thinking disclosure to the employer is enough.

    Students link referral fees only to employer rules such as Standard IV(B).

    Fix: Remember VI(C) names employer, clients and prospective clients. Each needs to be told as appropriate.

  • Assuming only cash payments count.

    The words 'referral fee' suggest money.

    Fix: The standard says compensation, consideration or benefit. Gifts, favours and reciprocal referrals count too.

  • Believing a suitable recommendation removes the duty.

    Students think the client was not harmed.

    Fix: Disclosure is required regardless of suitability. The point is letting the client judge objectivity and cost.

  • Forgetting that paying a referral fee also triggers disclosure.

    Students picture only the person who receives the money.

    Fix: The wording says received from or paid to others. Both sides disclose.

  • Accepting disclosure after the client has signed.

    The member seems honest in the end, so late disclosure looks fine.

    Fix: Disclosure should come before the service is provided so it can influence the client's decision.

  • Confusing VI(C) with VI(A) or IV(B).

    All three deal with conflicts and compensation.

    Fix: VI(A) covers conflicts generally. IV(B) covers additional compensation arrangements, meaning compensation or benefits from parties other than the employer for services that might conflict with the employer's interest, and it requires written consent from the employer. VI(C) covers benefits for recommending products or services.

Worked examples

Example 1

A financial adviser at an asset manager in Frankfurt recommends a tax-planning firm to clients. The firm pays the adviser EUR 500 for each client who signs up. The adviser has told her employer but not her clients, saying the recommendation is sound anyway. Which statement best describes her conduct under Standard VI(C)? A. She complied, because the employer was informed. B. She violated the standard by not disclosing the payment to clients. C. She complied, because the recommendation was suitable.

Show the solution
  1. Identify the benefit: EUR 500 per client for recommending a service. This is compensation tied to a recommendation.
  2. Identify who was told: only the employer.
  3. VI(C) requires disclosure to employer, clients and prospective clients, as appropriate. Clients were not told.
  4. Option A fails because employer disclosure does not replace client disclosure.
  5. Option C fails because suitability does not remove the disclosure duty.
  6. Option B matches the missing step.

Answer: B. She violated Standard VI(C) by not disclosing the referral payment to clients.

Example 2

A portfolio manager in Singapore plans to refer clients to a custodian bank. The bank will give the manager's firm a share of its custody fees. Before clients sign up, what should the manager do to comply with Standard VI(C)? A. Disclose the fee-sharing arrangement to her employer and to clients before they sign. B. Disclose it only if the share exceeds a material threshold. C. Wait until the first fee is received, then disclose it to clients.

Show the solution
  1. The firm will receive a share of fees for referring clients. That is a benefit for recommending a service.
  2. VI(C) applies regardless of amount, so a materiality threshold is not part of the rule. Option B is wrong.
  3. Disclosure should come before the service is provided, so waiting until the first fee arrives is late. Option C is wrong.
  4. Employer and clients both need to know. Option A covers both and is timely.

Answer: A. Disclose the arrangement to her employer and to clients before they sign.

Exam tips

  • Read for any hint of payment, gift or reciprocal referral linked to a recommendation. That signals VI(C).
  • Prefer answers with full, timely disclosure to both employer and clients over answers that rely on size, legality or suitability.
  • Watch for timing. 'Before the service' beats 'after' or 'when asked'.
  • With no penalty for wrong answers, eliminate the two options that excuse non-disclosure and pick from what is left.
  • Do not confuse VI(C) with IV(B). VI(C) is about benefits for recommending products or services to clients.

Practice questions from Guidance for Standard VI: Conflicts of Interest

Standard VI(C): Referral Fees in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Standard VI(C): Referral Fees: frequently asked questions

What does Standard VI(C) require?

It requires members and candidates to disclose to their employer, clients and prospective clients, as appropriate, any compensation, consideration or benefit received from or paid to others for recommending products or services. The goal is to let clients and the employer judge objectivity and total cost.

When must referral fees be disclosed?

Disclosure should be made before the client enters into the service agreement, so it can inform the decision. It should also describe the nature of the benefit. If arrangements change, update the disclosure.

Do non-cash benefits count under Standard VI(C)?

Yes. The standard uses the words compensation, consideration or benefit. Gifts, favours and reciprocal referrals count if they are connected to recommending products or services.

Does a small referral fee need to be disclosed?

Yes. Standard VI(C) does not set a minimum amount. Even a small benefit can affect the objectivity of a recommendation, so you disclose it.