Unlawful Representations Concerning Registrations
The Core Prohibition (Uniform Securities Act (USA) Section 405)
Under the USA, it is unlawful to make any representation inconsistent with the fact that registration does NOT imply:
- That the Administrator has approved the person or security
- That the Administrator has verified the accuracy of any information filed
- That the Administrator has passed upon the merits of any security or transaction
- That registration indicates any level of competence, training, or qualification
Any statement that implies otherwise is a violation of Section 405.
Think of it this way: Registration is like a driver's license. It means you met the minimum requirements to operate; it does not mean the government is vouching for your driving skills or recommending you as a chauffeur.
What You CAN vs. CANNOT Say
What registrants may say:
- An adviser MAY state the factual status of their registration (e.g., "registered as an investment adviser in the state of Virginia")
- An adviser may NOT say registration means the state has "approved" or "endorsed" them or their qualifications
The key distinction: You may state the fact of registration. You may not imply that registration carries any endorsement, approval, or quality judgment.
Applies to All Registrants
| Registrant Type | May State | May NOT State |
|---|---|---|
| Investment Adviser | "I am a registered investment adviser" | "The state has approved my qualifications" |
| Investment Adviser Representative (IAR) | "I am registered as an IAR" | "My registration means I am qualified" |
| Broker-Dealer | "We are a registered broker-dealer" | "The state has endorsed our services" |
| Securities | "This security is registered in this state" | "Registration means this is a safe investment" |
Exam Tip: Gotchas
- Registration = authorization, not endorsement. Any answer choice implying the Administrator has "approved," "endorsed," or "verified the quality" of a registrant is wrong.
- "The state approved me" is always prohibited. Even if a person genuinely passed the exam and completed all requirements, they cannot say the state "approved" them; only that they are "registered."
- This applies to everyone. Agents, IARs, broker-dealers, and investment advisers are all subject to this prohibition.
Memory Aid: Think "R does not equal E": Registration does not equal Endorsement. Registration is a legal filing; endorsement is a quality judgment. The Administrator does one, never the other.