Senior Designation

A representative at Ironvale Capital asks to print the credential "Certified Senior Retirement Strategist" on his business cards and in retail communications aimed at retirees. He obtained the credential from a private organization after a two-hour online course, with no examination, no experience requirement and no continuing education. What must the firm do?

1. A.Permit it, because the designation was in fact awarded to him and the statement is therefore literally true.Wrong. A literally true statement still violates the content standards if the overall impression misleads.
2. B.Permit it as long as the communication discloses the fee he paid to obtain the credential.Wrong. Disclosing the cost does not cure the misleading implication of expertise.
3. C.Permit it in institutional communications only, since institutional investors can evaluate credentials for themselves.Wrong. The problem is the substance of the credential, and the proposed use here is retail in any event.
4. D.Prohibit it, because a designation implying expertise the representative does not possess, awarded without meaningful standards, makes the communication misleading.Correct. Firms must vet designations, and this one conveys qualifications the representative has not earned.

Why: FINRA's content standards prohibit communications that are false, exaggerated, unwarranted, promissory or misleading. A professional designation that suggests specialized expertise in advising older investors, but that rests on a two-hour course with no testing, experience or continuing education, conveys a level of qualification the representative does not possess. Firms are expected to vet designations before permitting their use, considering whether a recognized body awards them, whether meaningful standards and examinations exist, and whether the credential can be verified.

A client of Bellmartin Quay Securities asks that her account be carried under the designation "Account 4471" rather than under her name, because she does not want branch staff to see the size of her holdings on screen. The branch manager is willing but wants to know what the firm must have on file before it may identify the account by number alone. What is required?

1. A.A written statement signed by the customer attesting that she is the owner of the account.Correct. The signed attestation of ownership is the condition on which an account may be designated by number or symbol.
2. B.Nothing beyond the branch manager's approval, since the designation is an internal firm convenience.A signed customer attestation of ownership is required. Internal approval alone is not enough.
3. C.Numbered accounts are prohibited outright, because they conceal the identity of the beneficial owner.They are permitted. Full identifying records remain on file behind the designation, so nothing is concealed from the firm or regulators.
4. D.The prior written consent of the Administrator, renewed annually for each numbered account.No Administrator consent is required for a numbered account, whether initially or annually.

Why: A firm may carry an account under a number or symbol rather than the customer's name, but only if it holds a written statement, signed by the customer, attesting that she is the owner of the account. The firm must of course still know exactly who the customer is: the full customer identification and account records sit behind the designation and are available to the firm and to regulators on request. What the number does is keep the client's name off routine screens and paperwork, which is a legitimate privacy interest. What it must never do is obscure ownership from the firm itself, and the signed attestation on file is precisely what prevents that.

Trentham Securities mails 2,000 people aged 65 and over an invitation to a complimentary dinner seminar on retirement income, at which one of its representatives will discuss the firm fund lineup. His business card describes him as a Certified Senior Retirement Consultant, a designation he obtained by paying a fee and passing a short online quiz. Under FINRA rules:

1. A.The designation is acceptable so long as the requirements to obtain it are disclosed on requestA designation implying senior expertise that the credential does not support may not be used, disclosed or otherwise.
2. B.Only the slides used at the seminar are communications; the invitation is administrativeThe invitation is itself a communication with the public and is subject to the same standards.
3. C.The invitation is a retail communication requiring principal approval and fair and balanced content, and the firm may not permit a designation that implies expertise the credential does not supportCorrect. The mailing exceeds 25 retail investors in 30 days, and the senior designation conveys unwarranted expertise.
4. D.The invitation is correspondence, because a seminar invitation does not itself recommend a securityCategory depends on how many retail investors receive it within 30 days, not on whether it recommends anything.

Why: The invitation goes to more than 25 retail investors in a 30-day period, so it is a retail communication: it needs principal approval before first use, must be filed where the filing rules require it, and must be fair and balanced. Separately, a firm may not allow a representative to use a designation that implies expertise or qualification he does not have; a credential earned by paying a fee and answering a few questions cannot be presented as specialised senior expertise.

A representative at Ironvale Capital advertises a free seminar for retirees and identifies himself as a "Certified Senior Wealth Consultant." He obtained that credential by paying a fee to an organization that requires no coursework, no examination and no continuing education. Under FINRA rules, the advertisement:

1. A.Is acceptable once the communication is filed with FINRA's Advertising Regulation DepartmentFiling does not cure misleading content.
2. B.Is acceptable once a registered principal approves it before first usePrincipal approval is required but does not make a misleading communication permissible.
3. C.Is acceptable, because the designation was genuinely conferred on him by a real organizationWhether the credential exists is not the test; whether it implies unearned expertise is.
4. D.Violates the content standards, because the designation implies expertise in advising seniors that its issuing standards do not supportCorrect. Misleading implications of credentials are prohibited, and firms must have procedures governing designation use.

Why: FINRA's content standards prohibit communications that are misleading or that imply expertise a person does not have, and firms must maintain procedures governing the use of professional designations. A credential purchased without any coursework, testing or continuing education implies specialized competence in advising seniors that the representative has not demonstrated, so using it with the public is misleading. Principal approval or filing does not cure a communication whose substance is misleading.