Registered Investment Advisor
Certification Examination (Ria)
Questions And Correct Answers (Verified
Answers) Plus Rationales 2026 Q&A |
Instant Download Pdf
Question 1
Which regulatory body primarily oversees Registered Investment Advisors in the
United States?
A. FINRA
B. SEC
C. FDIC
D. Federal Reserve
Answer: B. SEC
Rationale: The Securities and Exchange Commission (SEC) is the primary
regulator of Registered Investment Advisors with assets above the regulatory
threshold. While state securities regulators oversee smaller RIAs, the SEC
enforces fiduciary standards, disclosure rules, and compliance requirements for
federally registered advisors. FINRA regulates broker-dealers, not RIAs, while
FDIC and Federal Reserve supervise banking institutions, not investment
advisory firms.
Question 2
The fiduciary duty of an RIA requires:
,A. Maximizing commissions
B. Acting in the client’s best interest
C. Following broker-dealer suitability standards only
D. Prioritizing firm profits over client needs
Answer: B. Acting in the client’s best interest
Rationale: Fiduciary duty obligates RIAs to place client interests above their
own, including loyalty and care standards. This includes full disclosure of
conflicts of interest and seeking best execution. Suitability standards apply to
brokers, not RIAs. Prioritizing profits or commissions violates fiduciary
obligations.
Question 3
Which document outlines an RIA’s business practices, fees, and conflicts of
interest?
A. Form W-2
B. Form ADV
C. Form 10-K
D. Form 8-K
Answer: B. Form ADV
Rationale: Form ADV is the primary disclosure document required for RIAs,
detailing services, fee structure, disciplinary history, and conflicts of interest.
Form W-2 is for employment income, while Forms 10-K and 8-K are corporate
filings for public companies, not investment advisors.
Question 4
Which of the following best describes “churning”?
A. Excessive trading to generate commissions
B. Long-term passive investing
,C. Diversification strategy
D. Tax-loss harvesting
Answer: A. Excessive trading to generate commissions
Rationale: Churning occurs when an advisor excessively trades securities in a
client account primarily to generate commissions rather than serve client
objectives. It is a violation of fiduciary duty and securities regulations. Passive
investing, diversification, and tax-loss harvesting are legitimate strategies.
Question 5
An RIA must disclose conflicts of interest:
A. Only upon client request
B. Never
C. At the time of advisory agreement and ongoing basis
D. Only during audits
Answer: C. At the time of advisory agreement and ongoing basis
Rationale: RIAs are required to provide full and fair disclosure of conflicts both
initially and as they arise. Transparency ensures clients can make informed
decisions. Waiting for audits or client requests violates disclosure obligations.
Question 6
What is the primary purpose of an Investment Policy Statement (IPS)?
A. Market speculation guide
B. Define client goals and constraints
C. Tax reporting document
D. Regulatory filing requirement
Answer: B. Define client goals and constraints
Rationale: The IPS formalizes investment objectives, risk tolerance, time horizon,
, liquidity needs, and constraints. It guides portfolio construction and evaluation.
It is not a regulatory filing or tax document.
Question 7
Which risk is eliminated through diversification?
A. Market risk
B. Systematic risk
C. Unsystematic risk
D. Inflation risk
Answer: C. Unsystematic risk
Rationale: Diversification reduces company-specific (unsystematic) risk by
spreading investments across assets. Systematic risk, such as market or inflation
risk, cannot be eliminated through diversification.
Question 8
The Sharpe ratio measures:
A. Total return only
B. Risk-adjusted return
C. Tax efficiency
D. Liquidity risk
Answer: B. Risk-adjusted return
Rationale: The Sharpe ratio evaluates return relative to volatility, helping
investors assess performance per unit of risk. It is widely used for portfolio
comparison. It does not measure taxes or liquidity directly.
Question 9
Which order type guarantees execution at the best available price?
Certification Examination (Ria)
Questions And Correct Answers (Verified
Answers) Plus Rationales 2026 Q&A |
Instant Download Pdf
Question 1
Which regulatory body primarily oversees Registered Investment Advisors in the
United States?
A. FINRA
B. SEC
C. FDIC
D. Federal Reserve
Answer: B. SEC
Rationale: The Securities and Exchange Commission (SEC) is the primary
regulator of Registered Investment Advisors with assets above the regulatory
threshold. While state securities regulators oversee smaller RIAs, the SEC
enforces fiduciary standards, disclosure rules, and compliance requirements for
federally registered advisors. FINRA regulates broker-dealers, not RIAs, while
FDIC and Federal Reserve supervise banking institutions, not investment
advisory firms.
Question 2
The fiduciary duty of an RIA requires:
,A. Maximizing commissions
B. Acting in the client’s best interest
C. Following broker-dealer suitability standards only
D. Prioritizing firm profits over client needs
Answer: B. Acting in the client’s best interest
Rationale: Fiduciary duty obligates RIAs to place client interests above their
own, including loyalty and care standards. This includes full disclosure of
conflicts of interest and seeking best execution. Suitability standards apply to
brokers, not RIAs. Prioritizing profits or commissions violates fiduciary
obligations.
Question 3
Which document outlines an RIA’s business practices, fees, and conflicts of
interest?
A. Form W-2
B. Form ADV
C. Form 10-K
D. Form 8-K
Answer: B. Form ADV
Rationale: Form ADV is the primary disclosure document required for RIAs,
detailing services, fee structure, disciplinary history, and conflicts of interest.
Form W-2 is for employment income, while Forms 10-K and 8-K are corporate
filings for public companies, not investment advisors.
Question 4
Which of the following best describes “churning”?
A. Excessive trading to generate commissions
B. Long-term passive investing
,C. Diversification strategy
D. Tax-loss harvesting
Answer: A. Excessive trading to generate commissions
Rationale: Churning occurs when an advisor excessively trades securities in a
client account primarily to generate commissions rather than serve client
objectives. It is a violation of fiduciary duty and securities regulations. Passive
investing, diversification, and tax-loss harvesting are legitimate strategies.
Question 5
An RIA must disclose conflicts of interest:
A. Only upon client request
B. Never
C. At the time of advisory agreement and ongoing basis
D. Only during audits
Answer: C. At the time of advisory agreement and ongoing basis
Rationale: RIAs are required to provide full and fair disclosure of conflicts both
initially and as they arise. Transparency ensures clients can make informed
decisions. Waiting for audits or client requests violates disclosure obligations.
Question 6
What is the primary purpose of an Investment Policy Statement (IPS)?
A. Market speculation guide
B. Define client goals and constraints
C. Tax reporting document
D. Regulatory filing requirement
Answer: B. Define client goals and constraints
Rationale: The IPS formalizes investment objectives, risk tolerance, time horizon,
, liquidity needs, and constraints. It guides portfolio construction and evaluation.
It is not a regulatory filing or tax document.
Question 7
Which risk is eliminated through diversification?
A. Market risk
B. Systematic risk
C. Unsystematic risk
D. Inflation risk
Answer: C. Unsystematic risk
Rationale: Diversification reduces company-specific (unsystematic) risk by
spreading investments across assets. Systematic risk, such as market or inflation
risk, cannot be eliminated through diversification.
Question 8
The Sharpe ratio measures:
A. Total return only
B. Risk-adjusted return
C. Tax efficiency
D. Liquidity risk
Answer: B. Risk-adjusted return
Rationale: The Sharpe ratio evaluates return relative to volatility, helping
investors assess performance per unit of risk. It is widely used for portfolio
comparison. It does not measure taxes or liquidity directly.
Question 9
Which order type guarantees execution at the best available price?
