New Finra Testing Regime to Begin Next October
(Updates third paragraph to indicate that Finra is eliminating seven registration categories and related exams., and last paragraph to indicate specific exams.)
The Financial Industry Regulatory Authority will introduce a restructured competency examination program for first-time and experienced brokers on October 1, 2018, following approval this week by the Securities and Exchange Commission.
Under what it calls a “streamlined” exam structure that eliminates several registration categories and duplicative testing, the self-regulatory group will introduce a new Securities Industry Essentials (SIE) exam to test fundamental securities-related knowledge before people can apply to sell securities or specialized products or serve as investment bankers or research analysts, it said on Thursday.
Finra will eliminate seven of the 16 registration representative categories and exams for securities industry roles that it currently requires, saying they have become “outdated or have limited utility,” the self-regulatory group said.
“This is an important change built upon the need to streamline the examination process and eliminate redundancies in qualification and registration requirements,” Finra President and Chief Executive Robert Cook said in a prepared statement. “The new structure brings greater consistency and uniformity to the process for entering and returning to the brokerage industry.”
The revised exam regime will be delayed for 12 months to accommodate comments from member firms that sought time to adapt their systems to the new registration rule and to prepare new employees for the revised exams.
“The timing of the introduction of the new exam structure [also] considered impact to the firms and their recruiting cycles,” Finra spokeswoman Angelita Williams wrote in an e-mail.
The regulatory group responsible for overseeing securities industry sales has not yet set fees for the new exams but will be presenting them to its board of governors for approval at an upcoming meeting, she said.
People who are registered for some of the classifications that are being eliminated will not have to take new exams under a grandfathering provision, according to the approved this week.
Registration categories that have been retained and that will require qualification exams beyond the SIE are: investment company and variable contracts products rep, general securities rep (Series 7), direct participation programs rep, securities trader, investment banking rep, private securities offerings rep, research analyst and operations professional.
In an example of the expected efficiencies of the new structure, questions in the Series 7 exam for a general securities representative will shrink to 125 from 250 as more basic knowledge will be covered by the 75-question SIE that will be a Serie 7 prerequisite as of next October, Finra said.
Currently registered reps are exempted from having to take the SIE as are people whose registrations lapsed between October 1, 2014 and September 30, 2018, if they re-register within four years of the date of their last registration.
Tests will continue to be administered via computer at Prometric testing centers throughout the U.S. and globally, and both the SIE and representative-level exams can be scheduled for the same day if space at a testing center is available, Finra said.
The exams and registration categories being retired are S11, S17, S37, S38, S42, S62 and S72, according to Williams. The nine exams and 8 registration categories being retained are: S6, S7, S22, S57, S79, S82, S86/87 and S99.