In the context of SEC regulations, what is a 'selling away' violation?

A 'selling away' violation occurs when a registered representative conducts securities transactions that are not approved or known by their employer, typically outside the scope of the firm's business. This practice is considered problematic as it can lead to a lack of oversight and regulatory compliance from the firm, ultimately putting clients at risk.

When a representative engages in selling away, they are effectively sidestepping their employer's policies and procedures that are designed to ensure the integrity and safety of investment activities. This not only affects compliance with Securities and Exchange Commission (SEC) regulations but also can erode the fiduciary responsibility that the representative has to their clients, as actions taken would not be within the regulated framework provided by the employer.

In contrast, other options present violations that pertain to different aspects of securities laws or standards of conduct. For instance, failing to report trades to the SEC deals with regulatory reporting requirements, acting as a dealer without registration relates to licensing and registration regulations, and misrepresenting investment returns pertains to the accuracy of information provided to clients. Each of these has its own implications, but the cornerstone of 'selling away' specifically relates to the unauthorized execution of transactions outside of the employer's oversight.