Commissions and Contingent Fees:

Official Regulations

DIVISION OF CONSUMER AFFAIRS

NEW JERSEY STATE BOARD OF ACCOUNTANCY
Contingent Fees; Commissions, Performance Fees and Referral Fees

N.J.A.C. 13:29-3.8 and 3.12
Adopted November 16, 1998

13:29-3.8 Contingent fees

  1. A contingent fee is a fee established for the performance of any service pursuant to an arrangement in which no fee will be charged unless a specified finding or result is attained, or in which the amount of the fee is otherwise dependent upon the finding or result of such service.
  2. For the purposes of this section, a fee is not contingent if:
    1. It is fixed by a court or other public authority; or
    2. In tax matters, it is determined based on the results of a judicial proceeding or the findings of a governmental agency.
  3. A licensee in public practice shall not receive a contingent fee for performing any professional services from a client for whom the licensee or the licensee's firm performs:
    1. An audit or review of a financial statement;
    2. A compilation of a financial statement accompanied by a report; or
    3. An examination of prospective financial information.
  4. The prohibition set forth in (c) above applies during the period in which the licensee or the licensee's firm is engaged to perform any of the services listed, and the period covered by any historical financial statements involved in the listed services.
  5. A licensee in public practice shall not receive a contingent fee for preparing an original or amended tax return or claim for a tax refund for any client.
  6. Any licensee who receives a contingent fee pursuant to this section shall comply with all applicable Federal and State securities laws, rules promulgated thereunder, and registration requirements, including, but not limited to, the Investment Advisers Act of 1940 (15 U.S.C. *0b-1 et seq.), the Uniform Securities Law (1997) (N.J.S.A. 49:3-47 et seq.), the Securities Act of 1933 (15 U.S.C. *7a et seq.), and the Securities Exchange Act of 1934 (15 U.S.C. *8a et seq.).

13:29-3.12 Commissions, performance fees and referral fees

  1. A performance fee is compensation to a licensee on the basis of a share of the capital gains upon, or the capital appreciation of, the funds or any portion of the funds of a client.
  2. A licensee in public practice shall not receive a commission or performance fee for recommending or referring to a client any product or service, or receive a commission or performance fee for recommending or referring any product or service to be supplied by a client, or receive a commission or performance fee, when the licensee or the licensee's firm also performs for that client the following:
    1. An audit or review of a financial statement;
    2. A compilation of a financial statement accompanied by a report; or
    3. An examination of prospective financial information.
  3. The prohibition set forth in (b) above applies during the period in which the licensee is engaged to perform any of the listed services, and the period covered by any historical financial statements involving those services.
  4. A licensee in public practice who is not prohibited by this section from performing services for or receiving a commission or performance fee and who is paid or expects to be paid a commission or performance fee shall disclose that fact to any person or entity to whom the licensee recommends or refers a product or service to which the commission or performance fee relates.
  5. Any licensee in public practice who accepts a referral fee for recommending or referring any service of a licensee to any person or entity or who pays a referral fee to obtain a client shall disclose such acceptance or payment to the client.
  6. All disclosures in (d) and (e) above shall:
    1. Be made in writing contemporaneously with or prior to the referral or recommendation; and
    2. Shall be signed and dated by the person or entity to whom the licensee makes the referral or recommendation, or by the person or entity who was referred to the licensee.
  7. A licensee in public practice who is not prohibited by this section from performing services for or receiving a commission or performance fee shall comply with all applicable Federal and State securities laws, rules promulgated thereunder, and registration requirements, including, but not limited to, the Investment Advisers Act of 1940 (15 U.S.C. *0b-1 et seq.), the Uniform Securities Law (1997), the Securities Act or 1933 (15 U.S.C. *7a et seq.), and the Securities Exchange Act of l934 (15 U.S.C. *8a et seq.).

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