  We present spectral properties of an accretion disk model, in which a
Keplerian accretion disk is flanked by a sub-Keplerian halo component
terminating at a standing shock. The post-shock region (which may be considered
to be the boundary layer of a black hole) reprocesses the soft photons emitted
from the Keplerian accretion disk. We show that switching of states (from hard
to soft and vice versa) could be accomplished by a change in the accretion rate
of the Keplerian disk component. Our consideration, for the first time,
resolves a long-standing problem of identifying the illusive `Compton cloud'
responsible for the switching of states.
