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Richard - Bizlaw
Richard - Bizlaw, Attorney
Category: Legal
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Experience:  30 years experience corporate, litigation, international
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Can a Financial Consultant (FC) from Foreign Country (X) wth

Customer Question

Can a Financial Consultant (FC) from Foreign Country (X) wth offices in "X" legally earn a Referral Fee from a California Financial Advisor (CFA) from the proceeds of a Construction Loan or Investment given to "FC's" client from "X" for a Project in "X" if "FC" is not a licensed broker in California according to the Laws of California?
Submitted: 4 years ago.
Category: Legal
Expert:  Richard - Bizlaw replied 4 years ago.
Was the loan originated in X as opposed to CA? Was the referral agreement legal in X. What role did the CFA play in the project?
Customer: replied 4 years ago.

1) The loan would be originated in CA ("CFA" arranges funds from Californian or other american financial entities). But the Client was originated from "X", because the Client is from "X" and his project as well and "FC" introduces "Client" to "CFA". If you mean that "loan originated" means the origin of the client , then the answer is "X", but if you mean "loan originated" from the origin of the funds and broker seeking funds, then the answer is CA

 

2) The referral Agreement is Legal in "X" because "FC" is a company legally able to earn commissions for arranging funds for Clients, but the referral Agreement has a clause that states that "This agreement is according to California Law"

 

3) "CFA's" role is to be the broker of record, meaning they will sign a contract with "Client" superceding any contracts between "FC" and "Client". "CFA" will arrange the funding for "Client" and "FC" would be the sub-broker. "CFA" agrees (under California Law) to include a referral fee for "FC" on the closing escrow.

 

But what if FC does not get paid because contract is illegal? or agreement becomes void , because according to California law, FC needs to be licensed in CA to earn a fee of this nature?

 

 

 

 

Expert:  Richard - Bizlaw replied 4 years ago.

This creates an interesting situation in several respects. If FC was relying on CFA to set up the arrangement in accordance with applicable law, then CFA could be said to acted in equitably in setting up an arrangement it knew would not be legal for the purpose of taking a fee otherwise earned by FC for its own benefit. That circumstance could expose CFA to liability notwithstanding the fact that FC is not licensed in CA.

 

The solution is to have CFA reduce its fee by the amount owed to FC and have Client pay the fee due FC directly to FC. That leaves all parties where they expected to be. FC and CFA then operate as joint brokers and FC is not a sub broker. Client in making the payment at closing to FC is doing so in accordance with the laws of X which is permissible and CFA does not share any fee with a person it is not permitted to.

 

If this answer is responsive to your question, please accept it. That is how we are compensated. I would also be appreciated if you provided feed back on your view of the answer. Finally, if the answer was especially helpful you can provide a bonus. If I can be of further assistance or you have other questions in the future you can ask for me and reach me at this site.

This communication is not intended as legal advice. A local attorney should always be consulted for legal advice. No client/attorney relationship is intended or created by this communication.

Richard - Bizlaw, Attorney
Category: Legal
Satisfied Customers: 8653
Experience: 30 years experience corporate, litigation, international
Richard - Bizlaw and 11 other Legal Specialists are ready to help you
Customer: replied 4 years ago.

Hi Bizlaw. Very helpful. I accepted your answer. Here is some feedback from CFA in italics bold underlined.....Can you provide more feedback for another fee?

 

CFA is NOT a Financial Advisor or a real estate broker - and need not be registered as that is NOT the role we play.


This creates an interesting situation in several respects. If FC was relying on CFA to set up the arrangement in accordance with applicable law, then CFA could be said to acted in equitably in setting up an arrangement it knew would not be legal for the purpose of taking a fee otherwise earned by FC for its own benefit.

 

The "fee" being paid to FC is nothing more than a referral fee and is paid directly from escrow as indicated in section 6 on page two of agreement.

 

That circumstance could expose CFA to liability notwithstanding the fact that FC is not licensed in CA.

 

Again, no licensing is required for FC to receive a referral fee for business referred to our program.


The solution is to have CFA reduce its fee by the amount owed to FC and have Client pay the fee due FC directly to FC.

 

This is not acceptable to our funding partner and / or collateral partners. The initial fee paid covers ALL parties and is itemized in the draw down to meet full disclosure requirements. Capital and Collateral partners allow NO outside fees to be paid and therefore require that FCs fees come from the fee's already negotiated with the capital and collateral providers.

 

That leaves all parties where they expected to be. FC and CFA then operate as joint brokers and FC is not a sub broker. Client in making the payment at closing to FC is doing so in accordance with the laws of X which is permissible and CFA does not share any fee with a person it is not permitted to.

 

All parties are paid directly from escrow, protecting and fully disclosing all parties to the client - thereby meeting all contract and disclosure requirements.

Expert:  Richard - Bizlaw replied 4 years ago.

Thank you for accepting. HOwever, these are different questions so you have to post it as another question. Just ask for me and I will respond.

 

 

Customer: replied 4 years ago.
I could not find you..I just posted the question again
Expert:  Richard - Bizlaw replied 4 years ago.
I found the question. I will be out for a couple of hours and will give a response when I get back. I sent you a question from the new post.
Expert:  Richard - Bizlaw replied 4 years ago.
I found the question and sent you a question on it. I will be out a few hours but will respond when I get back this evening.

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