Is it legal for my stock broker to request a percentage of a non-commissioned trade?

I received a phone call from a stock broker known to me, who has given good advice in the past, allowing me to profit from trades I authorized with individual money wire transfers to fund them. In the phone call, he has offered to waive his BUY and SELL commission on a trade of about $150,000, asking only that, after I SELL, I pay him a percentage of the profit I derived from the trade. This sounds irregular to me. Is this legal? Is this dangerous?

Personal Finance, Stocks
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June 2017

Paying a performance fee is definitely illegal by SEC rule 205-3 which specifies that this is permitted only for qualified clients with a total net worth of at least two million dollars not counting a primary residence, or if the advisor has at least one million dollars of money invested by the client.  Such an agreement must be made in advance, and should never be done immediately prior to a trade.

For a sophisticated investor, paying zero management fees and 20% performance fees can be a superior method of compensation so an advisor only gets paid when is client comes out ahead.  However, only the wealthiest clients qualify for this kind of fee structure.

June 2017
June 2017
June 2017
June 2017