An investment adviser representative advises a client in a low income tax bracket to purchase municipal securities. Which of the following statements best describes this action?
a. The advice by the representative is unethical
b. Advice concerning tax-free securities is excluded from the provisions of the Investment Advisers Act of 1940
c. The action constitutes fraud
d. The Administrator has no jurisdiction over municipal securities unless the securities are out-of-state bonds

a. The advice by the representative is unethical

The action taken by the representative is unethical rather than fraudulent. Municipal securities provide federally exempt interest income. This is advantageous to individuals in higher tax brackets. Recommending the security to an individual in a lower tax bracket is not suitable. There is no indication that an intent to deceive the client was employed; therefore, an assertion of fraud is inappropriate.