The Core Prohibition (Uniform Securities Act (USA) unlawful-representations rule)
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 violates the USA's unlawful-representations rule.
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.