Question

A federally covered investment adviser (IA) instructs its investment adviser representatives (IARs) to add the initials "RIA" (registered investment adviser) after their names on their business cards.

The SEC prohibits the use of "RIA" because it may suggest that an IAR has obtained a certain level of competence.

Answer 1

The correct answer is option [C] "This is prohibited by the SEC because the use of "RIA" implies that the IAR is competent".

Step-by-step explanation:

The missing options of this question are:

[A] This is permitted because the IAR is registered.

[B] This is permitted because the SEC lacks authority to object to the content of business cards.

[C] This is prohibited by the SEC because the use of "RIA" implies that the IAR is competent

[D] This is prohibited by the SEC because "RIA" may be confused with "IAR."

The correct answer is option [C] "This is prohibited by the SEC because the use of "RIA" implies that the IAR is competent".

The federally covered investment adviser (IA) must not instruct its investment adviser representatives (IARs) to add the initials "RIA" (registered investment adviser) after their names on their business cards. An IAR cannot use the initials RIA, according to Rule 206(4)-1 under the Investment Advisers Act of 1940. Using the initials implies that the IAR is competent and this action is misleading for the clients and prospective clients.