1. The issue is 'custody and control" - if the owner hands you the gun and wanders off, there could be a technical violation (depends on how anal the cop is). If he/she is right there, and clearly exercising control of the firearm, you are OK.
2. The other issue is, most cops have never seen a Form 4, or any other ATFE paperwork. Many think that only cops should be allowed to have any guns!
It's best to know your state law, and respectfully ask the officer to look up Section XXX of the State laws.
If some officer insists on arresting you for having a legal firearm, DO NOT RESIST (or you get charged with resisting arrest, even if the arrest was illegal). Try to remain calm, and ask for a supervisor so you can explain the situation. And think about the big settlement check you will be getting from the agency for false arrest and interfering with your civil rights under color of law (42USC1983).