A Firm is an RIA, Not a Person.

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Rick Ferri
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A Firm is an RIA, Not a Person.

Post by Rick Ferri » Mon Oct 03, 2011 5:30 pm

How many times have you seen an advisor put RIA (registered investment advisor) on a business card or say they are an RIA in sales presentation? I see it all the time.

Well, it's illegal. Joe Smith, RIA on a business card is deceptive and unethical, according to regulators. A person is never an RIA. Only a firm can be an RIA. An advisor works for an RIA. RIA is a government registration. It's not an industry designation, credential or a title.

See this link: Advisers violating rules by using 'RIA'


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Re: A Firm is an RIA, Not a Person.

Post by dkturner » Mon Oct 03, 2011 6:00 pm

Rick Ferri wrote:How many times have you seen an advisor put RIA (registered investment advisor) on a business card or say they are an RIA in sales presentation? I see it all the time.

Well, it's illegal. Joe Smith, RIA on a business card is deceptive and unethical, according to regulators. A person is never an RIA. Only a firm can be an RIA. An advisor works for an RIA. RIA is a government registration. It's not an industry designation, credential or a title.

See this link: Advisers violating rules by using 'RIA'


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What if our friend, Joe Smith, is a sole proprietor, using his name as the name of his "firm"? How would Miss Manners suggest he design his letterhead / business card?

On an unrealated manner, how are these regulators doing in ferreting out the Bernie Madoff types who are still running loose out there?

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Post by Rick Ferri » Mon Oct 03, 2011 6:43 pm

If his name is his firm, then he would be Joe Smith from Joe Smith, LLC. He would not be Joe Smith, RIA. I know from previous experience that the SEC doesn't even like advisors putting RIA anywhere on stationary. It implies that they did something special to get that title. In fact, they only filed a form and paid a fee. It is MUCH easier for an 18 year old to become an RIA than it is for the same 18 year old to get a drivers license.

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Post by Zook13 » Mon Oct 03, 2011 6:52 pm

How foolish to put "RIA" after your name...This means something to somebody out there? Yikes.

I wish all of these regulation authorities would take the money and time to promote the differences between designations...

I would think John Smith, RIA would get laughed at by anybody in the industry, but it seems the industry does very little to make sense of it all to the types that would get confused by a non-designation...

I have yet to see anyone go by "John Smith, RIA", when there are designations out there that take an hour to get.

Doesn't, "John Smith, CSC, CSS, CRJ, CTL" sound better?
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Post by norookie » Mon Oct 03, 2011 7:11 pm

:oops:
Last edited by norookie on Tue Feb 05, 2013 9:16 pm, edited 2 times in total.
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Post by dandan14 » Mon Oct 03, 2011 7:16 pm

On a side note, that was on both my Series 65 and my CFP exams. They really, really, really want you to know that. :-)

How could anyone who has passed the 65 still make that mistake?

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Glad to see those are questions on those tests.

Post by David D » Mon Oct 03, 2011 7:34 pm

Unfortunately, that is a relatively recent phenomenon, and I would venture to guess that 50% of the representatives in the financial services industry don't know the rule - and even 20% of the RIA business.

You'd be flabergasted by how little many in our industry know about the rules and regulations governing the business. Many also conveniently ignore them. It's worth the effort to find the good ones if you are going to pay for investment advice. In most instances you don't need to, however.

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Post by LadyGeek » Mon Oct 03, 2011 8:17 pm

Can someone please show the SEC regulation that says only a firm can be a Registered Investment Adviser?

I found a definition for IAR in Part 275 of the Investment advisers Act of 1940: Sec. 275.203A-3 Definitions.
Investment advisers Act of 1940 wrote: For purposes of section 203A of the Act (15 U.S.C. 80b-3a) and the
rules thereunder:
(a)(1) Investment adviser representative. ``Investment adviser
representative'' of an investment adviser means a supervised person of
the investment adviser:...
However, reading references in Wikipedia (which is not the SEC) or Investopedia (which is better, but still not the SEC), is not clear at all that only firms can be RIAs.

Can someone please provide the pertinent regulation and suggest a clarification for the wiki?

Wiki article link: Investment adviser
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Post by dodonnell » Mon Oct 03, 2011 9:35 pm

Ladygeek, lets see if i can help clarify here:

A more user friendly version of the Investment Advisers Act of 1940 can be found on law school sites like this one: http://taft.law.uc.edu/CCL/InvAdvAct/sec202.html

I quote here:
11. "Investment adviser" means any person who, for compensation, engages in the business of advising others, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing, or selling securities, or who, for compensation and as part of a regular business, issues or promulgates analyses or reports concerning securities; but does not include ...
However, in this definition the term "person" is the legal definition of person under Federal law. This includes any legal entity, including an individual, along with firms like corporations and partnerships (think entity that can be sued).
16. "Person" means a natural person or a company.
So, yes, I believe an individual acting as sole proprietor and filing a schedule C on their personal tax return could be both a Registered Investment Adviser (IA) and the sole Investment Adviser Representative (IAR).

In fact, i believe many states, allow for one registration fee instead of two (one annual fee for the IA, and one annual for each IAR) for sole proprietors. However, most IAs are firms and IARs are always individuals.

To register as an Investment Avisor with the SEC (~$100M or more) or with the States (assets less than ~$100M) you usually have to pass the Series 65 exam or equivalent. A little more than a drivers license, but not much ;)

Additionally, last i checked it was still unlawful to use the designation R.I.A, RIA, or Registered Investment Adviser on even Registered Investment Adviser Representative on any presentation, business card, or literature - the key is that sensitive word "registered".

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Post by ThePrune » Tue Oct 04, 2011 1:32 pm

LadyGeek wrote:Can someone please show the SEC regulation that says only a firm can be a Registered Investment Adviser?
Strictly speaking, there may be some validity to your protests. If an Investment Advisor Representative works for a state-regulated IA firm,
they are not subject to most Federal IA laws and SEC regulations. For example at General Information on the Regulation of Investment Advisers the SEC states:
Most provisions of the Advisers Act and Commission rules apply solely to SEC-registered advisers, and therefore are not applicable to state-registered advisers. Thus, state-registered advisers are not required to file and amend Form ADV with the Commission under Rule 204-1; comply with the SEC's books and recordkeeping requirements under Rule 204-2; or deliver a brochure to clients under Rule 204-3. State investment adviser laws, however, may impose substantially the same requirements. For example, many state laws require advisers to register by filing Form ADV with the state.
So if a state's version of the Uniform Securities Act doesn't prohibit a state regulated individual calling themselves a Registered Investment Advisor, the SEC probably wouldn't step in.

Here in Michigan, the owner of a state-regulated, one-person registered investment advisory firm would still need to separately register as an Investment Advisor Representative (see http://www.michigan.gov/documents/dleg/ ... 6588_7.pdf ). If I dealt with such a person who referred to herself as a "Registered Investment Advisor", I'd be of the opinion that they were trying to deceptively impress me. It might not be illegal, though.

In terms of the uses of the initials RIA as an abbreviation for Registered Investment Advisor, the SEC's online article Information for Newly-Registered Investment Advisers has the following paragraph:
In addition, as a registered adviser, you may not imply that the SEC or another agency has sponsored, recommended or approved you, based upon your registration (under Section 208 of the Advisers Act). You should not use the term “registered investment adviser” unless you are registered, and you should not use this term to imply that as a registered adviser, you have a level of professional competence, education or special training. For example, the SEC staff has stated that advisers should not use the term “RIA” after a person’s name because using initials after a name usually indicates a degree or a licensed professional position for which there are certain qualifications; however, there are no federal qualifications for becoming an SEC-registered adviser.
That part about "the SEC staff has stated" makes me think there might not be a specific regulation that explicitly states the restriction. Rather, the SEC might just say the restriction is implied by IA 1940 section 208. Either way, if I was under SEC regulation, I wouldn't be making waves!
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Post by LadyGeek » Tue Oct 04, 2011 9:05 pm

ThePrune wrote:In terms of the uses of the initials RIA as an abbreviation for Registered Investment Advisor, the SEC's online article Information for Newly-Registered Investment Advisers has the following paragraph:
In addition, as a registered adviser, you may not imply that the SEC or another agency has sponsored, recommended or approved you, based upon your registration (under Section 208 of the Advisers Act). You should not use the term “registered investment adviser” unless you are registered, and you should not use this term to imply that as a registered adviser, you have a level of professional competence, education or special training. For example, the SEC staff has stated that advisers should not use the term “RIA” after a person’s name because using initials after a name usually indicates a degree or a licensed professional position for which there are certain qualifications; however, there are no federal qualifications for becoming an SEC-registered adviser.
That part about "the SEC staff has stated" makes me think there might not be a specific regulation that explicitly states the restriction. Rather, the SEC might just say the restriction is implied by IA 1940 section 208. Either way, if I was under SEC regulation, I wouldn't be making waves!
I think you might be looking at the wrong reference. That's the last paragraph covered under "Requirements for Investment Advisers that Advertise their Services." It's really all about advertising, which is what a business card does. Take a look at the introductory paragraph, which points to 275.206(4)-1 Advertisements by investment advisers.
GPO wrote:(a) It shall constitute a fraudulent, deceptive, or manipulative act, practice, or course of business within the meaning of section 206(4) of the Act (15 U.S.C. 80b–6(4)) for any investment adviser registered or required to be registered under section 203 of the Act (15 U.S.C. 80b–3), directly or indirectly, to publish, circulate, or distribute any advertisement:

(1) Which refers, directly or indirectly, to any testimonial of any kind concerning the investment adviser or concerning any advice, anaylsis, report or other service rendered by such investment adviser; or...

(b) For the purposes of this section the term advertisement shall include any notice, circular, letter or other written communication addressed to more than one person, or any notice or other announcement in any publication or by radio or television, which offers (1) any analysis, report, or publication concerning securities, or which is to be used in making any determination as to when to buy or sell any security, or which security to buy or sell, or (2) any graph, chart, formula, or other device to be used in making any determination as to when to buy or sell any security, or which security to buy or sell, or (3) any other investment advisory service with regard to securities.
IMO, a business card is a form of notice. Adding 'RIA' is implying a certain competency related to an investment advisory service. Maybe, as that's the opening statement in the OP's article.

Also note that the article is not only about using 'RIA', but covers a multitude of other violations. I think there's a big missed point in the middle of the article(?) The states are taking over from the SEC next year.
State securities regulators are poised to take over regulatory oversight from the Securities and Exchange Commission in June 2012 of investment advisers that manage assets under $100 million. The Dodd Frank financial reform legislation boosted the size of advisers regulated by the states from today's $25 million AUM. An additional 3,200 advisers are expected to come under state jurisdiction.
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Post by rob » Tue Oct 04, 2011 9:18 pm

norookie wrote:
Zook13 wrote:How foolish to put "RIA" after your name...This means something to somebody out there? Yikes.

I wish all of these regulation authorities would take the money and time to promote the differences between designations...

I would think John Smith, RIA would get laughed at by anybody in the industry, but it seems the industry does very little to make sense of it all to the types that would get confused by a non-designation...

I have yet to see anyone go by "John Smith, RIA", when there are designations out there that take an hour to get.

Doesn't, "John Smith, CSC, CSS, CRJ, CTL" sound better?
:D No. Why? What are all those alphabet certifications? There are plenty of people that might intellectually, by, RIA. A 403b "administrator" said to me, CPAs know nothing about investing, attempting to hold high fee'd crap funds I was telling family to transfer.
Working in a fin "services" company I see a lot of this..... I am tempted to put "ctrl alt del" on my card and see who notices :-)
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Who cares?

Post by efmoody » Wed Oct 05, 2011 11:02 am

this seems to be a moot issue overall. One can become registered ' years ago by filing paperwork with the SEC indicating they had passed a series 7 exam. Probably the bulk of RIAs in business for awhile have done that.
Unfortuantely, the fundamentals of investing have never been taught to a series 6, 7 ,24 licensee et al so it doesn't imply a knowledge base at all.
Diversification is not taught. There is no requirement in the use of a financial calculator. And if they cannot use one, they do not know how money works. Therefore, you do not use them.

Actually 85% of advisers do not own a personal financial calculator and another 10% do not use them. You now have reduced the number of finanical advisers to no more than 5% of the 'professional' populace.

If you want to do the work yourself, you have to have such capability. Maybe 0.1% of consumers can do so.

Not a very pretty picture overall but that is why some many retirees have so little money left since you also have to know what numbers to put in. Neither did.

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Post by LadyGeek » Wed Oct 05, 2011 4:47 pm

The wiki has been updated to explain the SEC restrictions on use of "RIA."

Wiki article link: Investment adviser

I also found the change in state regulations for those with AUM less than $100 million. It's a bit more complicated- there will be a new "mid-sized" adviser class.

Here's the full details from the SEC: SEC Adopts Dodd-Frank Act Amendments to Investment Advisers Act. Look under "Reallocation of Regulatory Responsibility."
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Re: Who cares?

Post by Epsilon Delta » Thu Oct 06, 2011 8:47 am

efmoody wrote:Actually 85% of advisers do not own a personal financial calculator and another 10% do not use them. You now have reduced the number of finanical advisers to no more than 5% of the 'professional' populace.
Most of those financial advisors can't use a slide rule either, however least 95% of them have a computer with a spreadsheet. I challenge you to propose a calculation that can be accomplished on a financial calculator that cannot be performed on LibreOffice Calc.
efmoody wrote:If you want to do the work yourself, you have to have such capability. Maybe 0.1% of consumers can do so.

Not a very pretty picture overall but that is why some many retirees have so little money left since you also have to know what numbers to put in. Neither did.
You may be correct when you say people don't know how, but the tools are widely available.

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IAR vs RIA

Post by rocket » Thu Oct 06, 2011 11:53 am

the firm is an REGISTERED INVESTMENT ADVISOR (RIA).
The individual working for the firm is an INVESTMENT ADVISOR REPRESENTATIVE (IAR).

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Post by efmoody » Thu Oct 06, 2011 4:34 pm

Do a risk of loss as identified previously.

Or do a review of stocks per Mandelbrot for the S&P 500

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Re: IAR vs RIA

Post by LadyGeek » Thu Oct 06, 2011 7:58 pm

rocket wrote:the firm is an REGISTERED INVESTMENT ADVISOR (RIA).
The individual working for the firm is an INVESTMENT ADVISOR REPRESENTATIVE (IAR).
Thanks. We found an SEC document that clarified this (and was easy to read), so the wiki is updated. Now, I understand why the SEC's IAPD database differentiates between RIA and representatives (IAR).

Wiki article link: Investment adviser

Click on the "Discussion" tab (upper left corner) to see the wiki editors' collaboration.

Comments / questions / concerns are welcome.
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Post by fcirullo » Tue Oct 11, 2011 2:18 pm

I want to thank Rick, Lady Geek, and everyone who contributed to this important thread.

To research this topic I called the Supervisor of The Department of Corporations - State of California. He told me that the proper way for a sole proprietor to disclose to the public that he or she is an investment adviser is as follows: Frank R. Cirullo, DBA First Capital Management, registered investment adviser (RIA).

P.S. In the past, to disclose to the public that I am an investment adviser I have mistakenly left out the DBA, and I have simply said Frank R. Cirullo is a registered investment adviser (RIA). Or sometimes I have shortened it to Frank R. Cirullo is a RIA. But Frank R. Cirullo, RIA, is not on my business card, nor do I sign my name that way.

Best wishes,

Frank R. Cirullo
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Post by ddb » Tue Oct 11, 2011 2:46 pm

fcirullo wrote:To research this topic I called the Supervisor of The Department of Corporations - State of California. He told me that the proper way for a sole proprietor to disclose to the public that he or she is an investment adviser is as follows: Frank R. Cirullo, DBA First Capital Management,
What if there is no dba, i.e. the individual markets his/her practice under his/her own name as a sole proprietor?

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Post by fcirullo » Tue Oct 11, 2011 3:10 pm

ddb wrote:What if there is no dba, i.e. the individual markets his/her practice under his/her own name as a sole proprietor?

- DDB
It's a good question, but I did not ask him that one. It would be best for the adviser to call the supervisor at the Department of Corporations in the state that he or she does business in.

Edited on 10/11/2011 to assign the quote to the proper person, ddb.
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Post by fcirullo » Wed Oct 12, 2011 5:35 pm

ddb wrote:What if there is no dba, i.e. the individual markets his/her practice under his/her own name as a sole proprietor?

- DDB
I got an answer to your question from an official at the U.S. Securities and Exchange Commission. He called me today and said that a sole proprietor doing business using his or her own name can say "I am a registered investment adviser (RIA)."

Edited on 10/12/2011 to put the quotation marks shown in my last sentence.
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Re: A Firm is an RIA, Not a Person.

Post by LadyGeek » Thu Jan 17, 2013 9:12 pm

I'm reviving this old thread because it's linked from the wiki. In Subject: Private Client Accounts, ihckennedy posted a link to his blog article which had some very helpful tips on using Form ADV.
ihckennedy wrote:Here's some advice on how to select an investment adviser: http://simplesmartinvesting.com/?p=175

Good luck!
In detail, understanding answers to questions 5 and 11 can quickly determine:

-If determine if the firm provides services for financial planning or just provides investment advice.
-If the firm has a history of legal problems

I updated the wiki to reflect changes to the SEC website layout and to incorporate the Form ADV information.

Wiki article link: Investment adviser

Comments / questions / concerns are welcome.
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