Non-registered representative

Why is a non-registered representative not allowed to discuss a particular investment product or its attributes?

How is it different than a friend talking about the benefits of a Roth IRA?

I thought providing a form to open an account is something that shouldn’t be permitted?

Thanks for clarifications!

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Hi @FoxMcCloud! Good question. You’re right - can friends freely chat about the benefits and risks of securities and investment products? Yes! However, the difference is whether those discussions delve into “business territory.” When a person or firm wants to discuss securities as a business activity, they must be properly registered to do so.

We see this type of regulatory structure outside of finance as well. For example, could a friend of yours cut your hair as a friendly gesture without issue? Of course. However, anyone opening a barber shop as a business must be properly registered with the state. Operating as a business without proper licensing and registration could result in fines, lawsuits, etc.

Employees of securities firms that are not licensed may generally perform clerical roles, but cannot discuss the attributes, benefits, or risks of securities. Providing a client with an account form is included in the category of clerical duties, and therefore is okay for unregistered representatives. After all, they’re just providing a form to a client. However, if they discuss the specifics of investments to be held in the account that will be opened or perform a suitability determination*, they are breaking FINRA rules (must be licensed to do this).

*Suitability determinations involve going through suitability-related information (e.g. net worth, annual income, investment objectives, risk tolerance, etc.) with a client.


Thank you. that totally made things clearer!

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