NASAA Series 65, Uniform Investment Adviser Law ExaminationLaws, Regulations, and Guidelines, including Prohibition on Unethical Business PracticesMedium
An investment adviser representative (IAR) is designing a new website for their firm. To ensure compliance with advertising regulations, which of the following practices is explicitly prohibited by the Uniform Securities Act?
- AOffering a free consultation to prospective clients without obligation.
- BDisplaying a chart showing the firm's historical performance over the past five years, clearly indicating the time period and that past performance is not indicative of future results.
- CIncluding a statement that the IAR's registration with the state Administrator implies a level of skill or approval by the regulator.
- DProviding links to independent financial news articles discussing market volatility.
Show answer & explanationAnswer & explanation
Correct answer: C. Including a statement that the IAR's registration with the state Administrator implies a level of skill or approval by the regulator.
It is a prohibited practice to imply that registration with a regulatory body (like the state Administrator or SEC) suggests any level of skill, endorsement, or approval by that regulator. Registration only means the entity has met the requirements to operate.
Why the other options are wrong
- A. Offering free consultations is a common and permissible marketing practice.
- B. Historical performance is generally allowed if presented fairly with appropriate disclosures.
- D. Providing links to independent news is generally acceptable, as long as it's not misleading or an endorsement of the content.
IA Advertising - Implied Regulatory Approval
Investment advisers are strictly prohibited from advertising that their registration with a state Administrator or the SEC implies any level of skill, endorsement, or approval of their services by the regulator.
- Registration is a licensing requirement, not an endorsement.
- Prohibited under both federal (SEC) and state (USA) rules.
- Aims to prevent misleading clients about regulatory oversight.
- Must clearly state that registration does not imply skill or approval.
Memory trick: No Approval, No Guarantees, No Misleading!