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NASAA Adopts Investment Adviser Representative Continuing Education Model Rule

The recently-adopted and newly-implemented Continuing Education Model Rule for Investment Adviser Representatives (IARs) has multiple implications and effects for professionals throughout the financial services industry. Read more about the IAR Continuing Education (CE) Model Rule, who it will impact, where it is in effect, related requirements, and more.

What is Investment Adviser Representative Continuing Education (IAR CE?)

IAR CE is an annual continuing education requirement for IARs governed by the NASAA Model Rule on Continuing Education which was adopted in 2020 and implemented by states and jurisdictions beginning in 2022.

Why was the IAR CE Model Rule adopted? 

NASAA’s membership, with strong industry support, adopted the IAR CE Model Rule to address the lack of a continuing education requirement for IARs in contrast to other financial services professionals. These types of professionals are often required to maintain or expand their level of knowledge and competence after initial qualification, which is what the IAR CE Model Rule will now accomplish for IARs.

Who is the IAR CE for?

Any Investment Adviser Representative (IAR) who is registered in a state or jurisdiction that has adopted the NASAA IAR CE Model Rule will be subject to its new CE requirements.

FINRA and IAR CE

For dual registrants, IARs who are also registered agents of BD firms, completion of the FINRA CE Regulatory Element may be applied to meet the Products and Practices component of the IAR CE requirement.  NASAA will accept the Regulatory Element taken in 2020, 2021, and 2022 as an equivalent of the six credits for Products and Practices for 2022.

FINRA CE Firm Element training may also be applied to meet the IAR CE requirement if the training is approved by NASAA.

Professional Designation CE courses (CFP®, ChFC®, CFA®, PFS, CIC) are also eligible for IAR CE credit as long as they are approved by NASAA.

When does the IAR CE Model Rule go into effect?

The IAR CE Model Rule has gone into effect beginning in 2022 in the states that adopted the Model Rule by December 31, 2021.  These are Mississippi, Vermont, and Maryland.

State by state: Where is the IAR CE Model Rule in effect?

IARs registered in 3 states (MS, MD, and VT) must complete their IAR CE requirement by December 31, 2022.  Michigan, Wisconsin, Kentucky, Washington DC, Arkansas, South Carolina and Oklahoma have adopted the Model Rule in 2022, which means IARs registered in these states will need to complete IAR CE starting on January 1, 2023.  As of August 2022, all other states listed have legislation pending to adopt the Model Rule.

States the IAR CE Model Rule is in Effect

 

State

Status

Effective Date

Mississippi

Adopted

January 1, 2022

Vermont

Adopted

January 1, 2022

Maryland

Adopted

January 1, 2022

Michigan

Adopted

January 1, 2023

Wisconsin

Adopted

January 1, 2023

Kentucky

Adopted

January 1, 2023

OklahomaAdopted
January 1, 2023
Washington DCAdoptedJanuary 1, 2023
South CarolinaAdoptedJanuary 1, 2023
ArkansasAdoptedJanuary 1, 2023
NevadaPendingTBD
Rhode IslandPendingTBD

 

IAR CE Requirements

IARs are required to complete 12 hours of CE credit per year in order to maintain their IAR registration.  This includes 6 hours of Products and Practices and 6 hours of Ethics and Professional Responsibility.  An IAR taking more than 12 credit hours per year is not allowed to carry forward those excess credits into the following year.

Approved IAR CE Course Providers

IARs are required to take NASAA-approved CE courses from approved course providers.  Any vendor, firm, individual, or state may provide CE so long as the provider and course are approved. The list of approved course providers—including Kaplan—can be found here.

IAR CE Costs

NASAA has implemented a course reporting fee of $3 per credit hour.  Therefore in addition to any training costs, an IAR can expect to pay $36 per year to meet their CE requirement.

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August 30, 2022
Woman learning about modified Series 52 Exam on her laptop

SEC Shortening Trade Settlement Cycle from T+2 to T+1

The SEC recently announced that trade settlement will be reduced from T+2 to T+1. Read more about the reason behind this reduction, when it will take effect, and what it will mean to member firms going forward.

What is the Settlement Cycle?

When selling or purchasing securities there is a cutoff date when the securities traded must be delivered by the selling side and paid for by the purchasing side. That date for most corporate securities is fixed under a set of rules called the Uniform Practice Code. Regulators and the various stock exchanges all agree to operate under this code. The most common settlement arrangement is called regular way and it currently calls for settlement on the second business day from the trade date; what is commonly known as T+2.

When is the Settlement Cycle being Shortened from T+2 to T+1?

In February 2022, the Commission moved to accelerate the settlement cycle from T+2 to T+1. The SEC has stated that the change will take effect in the first half of 2024.

With the passage of the Securities Acts Amendments of 1975, Congress empowered the SEC with the authority to change the trade settlement cycle. Eighteen years later, in 1993, the Commission used that authority to again shorten the settlement cycle from T+5 business days to T+3. The SEC then shortened from T+3 to T+2 on the first full day of spring, 2017. The upcoming change in 2024 will be the first alteration of the settlement cycle since then.

Why is the Settlement Cycle being Shortened from T+2 to T+1?

What the shortening means practically for settlement is that confirmations, allocations, and trade affirmations will effectively move to T+0 in order for settlement to occur on time. Although member firms will be challenged during the transition period to adopt technology and software to realize optimal settlements, the overall benefit is to reduce risk, and strengthen and modernize securities settlement in the U.S. financial markets

Benefits of the Settlement Cycle being Shortened from T+2 to T+1

The benefits of the shortened settlement cycle include lower risk, lower costs associated with the margin needed to post with clearinghouses, and quicker access to funds.

The pandemic year of 2021 intensified the strain of volatility and trading volume, coupled with the enormous number of transactions in “meme” stocks. With that volume came higher margin requirements on retail brokerage, leading to restricted trading in those stocks, leaving some investors unable to purchase stocks at a critical time.

The Commission is confident that shortening the settlement cycle—from T+2 to T+1, plus the corresponding move to accelerate settlement to T+0—as technology allows will further
enhance our trading markets.

Concerns about the Settlement Cycle being Shortened from T+2 to T+1

Apart from the more widely understood future need to deliver securities and funds one day earlier, there are other concerns to the shortened cycle, which includes:

  • Fails-to-deliver
  • Fails-to-receive
  • the process of reclamation
  • Regulation SHO
  • Buy-ins
  • sell-outs and 
  • other settlement methods such as DVP/RVP.
These are just some of the issues that are affected by the change and appear on certain qualification exams.

How Member Firms Must Respond to the Shortened Settlement Cycle

Thankfully, the Commission will not require firms to adopt T+1 until sometime in the first half of
2024, giving member firms and FINRA’s qualifications department time to adjust accordingly, as there’s much to consider and put into practice.Member firms will need to increase their budget for operational and technology costs while anticipating reduced revenue from securities lending.

Because settlement weaves itself throughout industry practices and processes, we at Kaplan will be looking at the hundreds of ways shortened settlement will impact Licensing Exam Manuals and practice test questions through our many study programs. The day T+1 goes into effect, we will be ready, and our students may look forward to being fully equipped with the latest, most up-to-date materials.
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Posted by William R. James - April 1, 2022
Abstract investment performance numbers

Changes in SEC Regulation A and Regulation D

On March 15, 2021 certain important SEC rule changes went into effect.

SEC Regulation A

What is new?

The regulation now provides two offering tiers for both U.S. and Canadian issuers.

Tier 1 securities offerings up to $20 million in a 12-month period, including no more than $6 million sold on behalf of selling shareholders. Subject to a coordinated review by states and the SEC. The issuer must file Form 1-A (greatly simplified from the complex Form S-1) along with two years of financial statements. There is no need for these statements to be audited.

Therefore, on this tier, state “blue sky” laws of every state in which the issuer expects to raise money are applicable. When the offering is complete it must also file an exit report on Form 1-Z not later than 30 days after completing the offering, explaining how much was raised and how the money was allocated. Note that this harmonizes with Regulation D, which also requires a final report (using Form D) within 30 days of concluding the offering. Lastly, there are no restrictions to resale and no investor requirements, such as being an accredited investor.

Tier 2, as of March 15, 2021, securities offerings up to $75 million in a 12- month period, including no more than $22.5 million of securities sold on behalf of selling affiliate shareholders, such as officers and directors. This is an increase from the previous limits of $50 million and $15 million respectively.

Tier 2 permits a kind of mini-IPO allowing small, emerging companies to forego venture capital and raise substantial capital that is subject only to SEC scrutiny, preempting the burden of state regulation. New and innovative companies can look to nonaccredited investors such as their customers, employees, or even the general public for substantive financing with only a fraction of the regulatory burdens formerly seen. As we read in Tier 1, a Form 1-A must be filed along with two years of audited financial statements, and an exit report. A Tier 2 exit report can be satisfied by filing Form 1-Z or alternatively 1-K, which is specifically designed with the view to satisfy both purposes. With this tier the issuer must also file annual (Form 1-K), semi-annual (Form 1-SA), and “current report” (Form 1-U) similar to Form 8-K in public companies.

Companies that are already publicly reporting, such as companies that are listed on an exchange, will be considered compliant concerning their Regulation A ongoing disclosure obligations by remaining current in their public reporting obligations. Non-accredited investors are subject to limits on how much they can buy based on their annual income and net worth unless the offering is to be listed on a national stock exchange, then there is no restriction. Non-accredited investors are subject to investment limits based on the greater of annual income and net worth.

Both tiers exclude blank check companies (SPACS), registered investment companies such as mutual funds and asset-backed securities. “Bad actor” disqualifications also apply. A bad actor includes, in part, the issuer, directors, partners or executive officers who have:

  • Criminal convictions relating to securities transactions
  • Made false filing with the SEC
  • Been suspended or expelled from SROs such as FINRA

These Regulation A offering statements and disclosures must be filed on EDGAR in the same fashion as we previous read about S-1 registrations for IPOs. Tier 2 issuers are required to concurrently file a short-form Form 8-A to register a class of securities under Exchange Act. This is very desirable because it allows a Tier 2 issuer, if it chooses to do so, to list on a national securities exchange. “

Testing the waters” on a new offering under Regulation A is permitted by the issuer to determine investor interest. This is done by distributing statements about the offering right up to the time the SEC qualifies its Form 1-A offering circular. During the pre qualification period, issuers must deliver a preliminary offering circular to prospective buyers at least 48 hours in advance of the sale unless the issuer is subject to, and current in, Tier 2 ongoing reporting obligations.

Regulation D Offerings

What is new?

As of March 15, 2021, a Rule 504, Regulation D offering, which is distinct from most of the Regulation D rules, involves the offering of securities in which the dollar amount does not exceed $10 million. It is distinct from 506 in that:

  • There are no limitations on the number of purchasers, accredited or non.
  • There is no requirement that purchasers meet suitability or sophistication standards, though bad actors, as mentioned above, are prohibited from participating.

Rule 504 offerings are not available for blank check companies (entities without a defined business or business plan).

Regulation DSize Accredited Investors Non Accredited InvestorsGeneral Solicitation*
Rule 504 $10 millionUnlimited Unlimited No 
Rule 506(b)Unlimited Unlimited 35 No 
Rule 506(c)*Unlimited Unlimited 0Yes 

 

*The JOBS Act required the Commission to eliminate the prohibition on using general solicitation under Rule 506 where all purchasers of the securities are accredited, and the issuer takes reasonable steps to verify that the purchasers are in fact accredited.

SEC Regulation Crowdfunding

Issuers may rely upon section 4(a)(6) of the Securities Act of 1933 (Regulation Crowdfunding), which enables companies to offer and sell securities exempt from the registration requirements of the act.

The rules require all transactions under Regulation Crowdfunding to take place online through an SEC-registered intermediary. That may be either a broker-dealer or a funding portal that permits a company to raise a new (2021) maximum aggregate amount of $5 million. The offering requires disclosure of information by filings with the Commission on Form C, including two years of financial statements that are certified, reviewed, or audited, as required. Besides, progress and annual reports. These must also be sent to investors and the intermediary facilitating the offering.

There are now investment limits for accredited investors. For non-accredited investors, they may purchase an amount equal to the annual income, or alternatively, net worth, whichever is greater. Securities purchased in a crowdfunding transaction generally cannot be resold for one year. Regulation Crowdfunding offerings are also subject to "bad actor" disqualification provisions the same as Regulation A and D.

Sample Questions

1) Regulation A, requires an underwriting broker-dealer furnish an offering circular to purchasers?

A. 48 hours in advance of sales
B. 24 hours before the confirmation
C. 72 hours before the confirmation
D. Concurrently with the mailing of the customer confirmation

Regulation A requires that an offering circular be provided to purchasers at least 48 hours in advance of sales, so the answer is A.

2) The maximum public offering permissible under Regulation A is:

A. $500,000 per issuer and $500,000 per affiliate
B. $2 million per issuer and $100,000 per affiliate
C. $2 million per issuer and $500,000 per affiliate
D. $75 million

The maximum size of an offering under Regulation A (sometimes known as A+) is $75 million per issuer, so the answer is D. Sales are measured over a 12-month period.

3) Under Regulation D, Rule 504 offerings provide a safe harbor for the sales of securities:

A. Without regard to dollar amount
B. Not exceeding $10 million
C. Not exceeding $50 million
D. Not exceeding $20 million

Regulation D offerings are exempt transactions under the Act of 1933. Rule 504 provides a safe harbor from full registration for private placements in which the dollar amount to be sold is $10 million or less, so the answer is B. By comparison, Rule 506(b) and (c) has no ceiling on the dollar amount offered.

4) Regulation Crowdfunding permits offering limits to:

A. $500,000
B. $1 million
C. $5 million
D. $20 million

Offering limits are currently set by federal regulators to $5 million, so the answer is C. They also amended the individual investment limits for investors in Regulation Crowdfunding offerings by removing investment limits for accredited investors.

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Posted by William R. James - March 26, 2021
SECURE Act Discussion with Client

SEC Spells out Use of the Terms “Advisor” and “Adviser” for Dual Registrants

An individual who represents a FINRA member firm and has a Series 7 registration is legally known as a General Securities Registered Representative. That is quite a mouthful when making an “elevator pitch,” so various terms have been employed to describe the position. Depending on what decade you became registered, you might have been a stockbroker, an account executive, or, the most recent iteration, a financial advisor (FA).

That is about to change for many in the industry.

Many studies indicated that the general investing public was unaware of the differences between a broker-dealer and an investment adviser. Referring to oneself as a financial advisor added to the confusion. Given that the titles adviser and advisor are closely related to the statutory term “investment adviser,” their use by broker-dealers can have the effect of erroneously conveying to investors that they are regulated as investment advisers and have the business model, including the services and fee structures, of an investment adviser. Such potential effect undermines the objective of the capacity disclosure requirement under Regulation Best Interest to enable a retail customer to more easily identify and understand their relationship.

The disclosure requirement of the newly effective (June 30, 2020) Regulation BI attempts to eliminate that issue. In the simplest terms, the term adviser or advisor cannot be used if the member firm’s only registration is that of a broker-dealer and the individual’s registration is only as a registered representative. For those firms (and individuals) who are dual registrants, the term may be used even when the account is only a “BD” account and not solely for
advisory accounts.

The SEC specifically states: “We would presume the use of the terms adviser and advisor by (1) a broker-dealer that is not also registered as an investment adviser or (2) a financial professional that is not also a supervised person of an investment adviser to be a violation of the Disclosure Obligation under Regulation Best Interest.”

As with all rules, there are exceptions, and we recommend you check with legal counsel to see if any of them apply to your personal situation.
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Posted by Chuck Lowenstein - September 11, 2020
A hand with a pen writing

General Update for Accredited Investor and Qualified Institutional Buyer

The SEC adopted amendments to the “accredited investor” definition in August 2020. Historically, people who do not meet certain income or net worth tests, regardless of their financial sophistication, were prohibited from investing in many private markets. From here on, individual investors are permitted to participate in private capital markets not only based on income or net worth but also well-defined measures of financial sophistication.

The amendments allow investors to qualify as accredited investors based on professional knowledge, experience, or certifications, in addition to the existing tests for income or net worth. The amendments also expand the list of entities that may qualify as accredited investors, including allowing any entity that meets an investment test to qualify. The SEC also adopted amendments to update and improve the definition of qualified institutional buyer in Rule 144A under the Securities Act of 1933.

The New Categories

  • Natural persons qualified based on certain professional certifications, designations or credentials, or other credentials issued by an accredited educational institution
  • Holders in good standing of the Series 7, Series 65, and Series 82 licenses as qualifying natural persons. The Commission has the flexibility to reevaluate or add certifications, designations, or credentials in the future
  • Concerning investments in a private fund, natural persons who are “knowledgeable employees” of the fund
  • LLCs with $5 million in assets
  • SEC- and state-registered investment advisers
  • Exempt reporting advisers and rural business investment companies (RBICs)
  • Governmental bodies
  • Funds and entities organized under the laws of foreign countries that own “investments” as defined in Rule 2a51-1(b) under the Investment Company Act, more than $5 million and that was not formed for the specific purpose of investing in the securities offered;
  • "Family offices" with at least $5 million in assets under management; and
  • Their “family clients,” as each term is defined under the Investment Advisers Act; and
  • The term “spousal equivalent” to the accredited investor definition so that spousal equivalents may pool their finances for the purpose of qualifying as accredited investors

For those who wish to reference the rule, the amendment to Rule 215 replaces the existing definition with a cross-reference to the definition in Rule 501(a).

The definition of qualified institutional buyer in Rule 144A is now expanded to include limited liability companies and RBICs if they meet the $100 million in securities owned and invested threshold in the definition or any institutional investors included in the accredited investor definition provided, if they meet the $100 million threshold.

These amendments become effective 60 days after publication in the Federal Register. Once the new rule is in effect, our question banks will be updated, and the proper text will be added to the Content Updates of most FINRA exams and the NASAA Series 65 and 66 exams.

Sample Questions

Question 1

A registered broker-dealer has lines of business that include acting as an agent for privately placed equity and debt securities. Often the issue amount exceeds $20 million. The firm is medium-sized and currently employs 250 representatives qualified to offer general securities. The firm has a new employee four-month training program with a minimum participation entry qualification requirement of passing the Series 7 examination. This new training class is comprised entirely of people who graduated from college within the past two years and demonstrated an aptitude for the securities industry by taking a third-party administered test. Which of the following statements concerning a new private equity placement is true?

A) Following successful completion of the firm’s training program, a representative’s pay would need to be equal to or exceed $200,000 per year with a strong likelihood that it would continue to be at that level.

B) Following successful completion of the firm’s training program, a representative would qualify to invest in the private offering if able to demonstrate by exam sufficient knowledge of Regulation D and Rule 144.

C) Following successful completion of the firm’s training program, any representative able to prove liquid assets totaling $1 million exclusive of primary residence may make a restricted investment in the offering.

D) Following successful completion of the firm’s training program, each representative would qualify to invest in a private offering.*

Explanation

Participation in a private placement of securities requires, with limited exceptions, that the investor be accredited. That includes those registered representatives who are currently qualified as a Series 7 General Securities Representative.

Question 2

Two Penny Coal, a limited liability company with $500 million invested in investment-grade corporate debt securities was approached by an agent for the issuer of a $1 billion private placement of convertible debentures rated A+ by Standard & Poor’s to judge interest in a $50 million piece. Two Penny Coal investment managers agree to purchase the piece. Which of the following is true following the purchase?

A) The firm may sell the debentures to QIBs without regard to a holding period.*

B) The firm must hold the securities for six months before being offered for sale to any person.

C) The firm may offer to sell the securities to U.S. citizens living abroad without concern of a holding period.

D) The firm must hold the debentures for at least one year.

Explanation

Two Penny Coal is a limited liability company that meets the $100 million threshold of a qualified institutional investor. It may purchase the offered securities and, if it chooses, offer them to another qualified institutional buyer (QIB) without concern of a holding period relying upon Rule 144A.

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Posted by William R. James - September 10, 2020
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How to Get a Securities License

So, you’ve earned—or are about earn—a bachelor’s or master’s degree in finance or a related field, and you’ve decided to sell securities. Or, you’ve decided to add securities to your financial services or insurance repertoire. Now that you have charted your path, the next step is earning the licenses you need to practice your profession. Let’s look at what that entails.

Step 1: Get to Know FINRA and NASAA—If You Haven’t Already

Financial Industry Regulatory Authority (FINRA) is the organization in charge of securities licensing and requirements, and it also administers most of the exams you’ll need to pass to get your license. FINRA also keeps all securities licensing records, writes and enforces rules governing the activities of broker-dealers, audits firms for compliance with those rules, fosters market transparency, and educates investors.

North American Securities Administrators Association (NASAA) is the association of state securities administrators who are charged with the responsibility of protecting consumers who purchase securities or investment advice. Its members participate in enforcement actions and share information, and it also coordinates training and education for state, district, provincial, and territorial securities agency staff. NASAA oversees the licensing requirements for three of the required securities license types.

Thinking about a career in securities? Download our free eBook, Launching Your Securities Career, to get tips and advice from 100+ securities professionals.

It’s important to get to know these organizations and keep up with their activities. For example, effective October 1, 2018, a new exam and licensing structure from FINRA will go into effect. The updated structure adds a new exam—the Securities Industry Essentials (SIE) exam—which anyone who wants to earn their first license after that date will have to pass. After passing that exam, the individual licensing exams will be considered “top-offs” and apply directly to the securities license you want to hold. The good news is that you don’t have to be registered or sponsored by a brokerage firm to take the SIE exam.

Step 2: Determine Whether You Should Take the SIE Exam

If you plan to earn a Series 6, Series 7, Series 79, and Series 99, you will also have to pass the SIE. These individual licensing exams are considered “top-offs” and apply directly to the securities license you want to hold. The good news is that you don’t have to be registered or sponsored by a brokerage firm to take the SIE exam. You may also take it while still in school. The other good news is that if you prefer, you can take your "top-off" exam first, if you wish, and the SIE afterwards.

 

Step 3: Determine Which Securities License or Licenses You’ll Need

You can’t sell securities at a brokerage firm without being licensed. The types of licenses you’ll need depend on the brokerage that’s hiring or sponsoring you. Most of those who hire or train new advisors will have a mandatory licensing program included in their training package, and almost all firms mandate which securities licenses must be obtained to sell the company's products and services. If you intend to be a Registered Investment Advisor or an independent broker-dealer, you’ll also need to be licensed.

Here’s a rundown of the most common FINRA and NASAA securities licenses:

  • Series 6: If you want to sell mutual funds, variable annuities, and other investment packages, you’ll need this license. Administered by FINRA and known as the limited-investment securities license, the Series 6 license enables you to sell what are known as packaged investment products. If you’re an insurance agent who wants to sell variable products, you’ll also need this license.
  • Series 7: If you’d like to be a stockbroker, this is the license for you. Administered by FINRA and known as the general securities representative license, the Series 7 license authorizes you to sell virtually any type of individual security, such as preferred stocks, options, bonds, and other individual fixed income investments—plus all forms of packaged products. Basically, this license enables you to sell everything except commodities futures, real estate, and life insurance.
  • Series 3: If you want to sell commodity futures contracts, you need the Series 3 license, also administered by FINRA.
  • Series 31: If you want to sell managed futures, which are pooled groups of commodities futures, you’ll need the Series 31 license, an offshoot of the Series 3 license.
  • Series 63: If you have a Series 6 license or a Series 7 license, and you want to do business as a stockbroker or sell mutual funds in any state, you need this license. Administered by NASAA, Series 63 is known as the Uniform Securities Agent license.
  • Series 65: If you want to be a financial planner or advisor who works for an hourly fee rather than a commission, or you want to be a stockbroker or other financial representative who deals with managed-money accounts, you’ll need this license. It’s also administered by NASAA.
  • Series 66: If you have a Series 7 license, you have already answered a good portion of the Series 65 exam, so instead of earning Series 63 and Series 65 separately, you can choose to hold this license instead.
  • Series 79: If you want to offer advice or facilitate debt or equity offerings (public or private), mergers or acquisitions, tender offers, final restructuring, asset sales, and divestitures or corporate reorganizations, you’ll need this license.
  • Series 99: If you plan to be a senior manager or a supervisor in operations or will have the authority to materially commit capital in various back office functions, you need this license.

These are the most common securities licenses. You can find a more comprehensive list at the FINRA and NASAA websites. Keep in mind that to earn some of these licenses, like the Series 6 and Series 7, you will need to be sponsored by or work for a broker-dealer.

Step 4: Check Your State Requirements

There might be additional requirements for selling securities in your state or the state where you want to be licensed. You should check with the respective office of the Secretary of State to learn about anything else you need to do to earn your securities license.

Step 5: Study for and Take the Exams—and Pass

To earn your Series 6, 7, 22, 57, 79, 82, and 99 license, you’ll need to pass the SIE exam and take the FINRA “top-off” exam for each license type. FINRA says that the exams are "corequisites," but that does not mean you have to take both at the same time. Instead, they mean that you can't earn your license without taking both, and you can take them in any order.

The licensing exams are not exactly a walk in the park. You need to study with purpose and planning. To help you out, many retail brokerage firms have an in-house training program or, in some cases, they have an agreement with an external training provider. Exam preparation and review courses go a long way toward helping you pass your exams the first time.

FINRA makes it easy to enroll for your exams, because they also administer the exams for your NASAA licenses. Simply visit this page

When you have completed an exam, the computer screen will indicate whether you’ve passed or failed the exam. It also presents a score profile that shows your performance based on the job responsibilities covered by the exam. The percentage required for passing varies. To pass the Series 7, 63, and 65 exams, you need a score of 72%. To pass the Series 66, you need a 73%. You should research your particular exam to find out what the passing score is, because it can change.

What’s Next?

After you pass your licensing exams, you’ll have to register your licenses with FINRA and an approved broker-dealer, who will hold your securities licenses and oversee your business for a portion of the commission income. If you intend to be a Registered Investment Advisor, you don’t have to be associated with a broker-dealer. However, you must register with the state you are doing business in if you’re managing assets that are less than $100 million or with the SEC if they are more than $100 million.

Ready to Go?

If you’ve already decided which licenses you’ll need, visit our resources page for information on how to pass each type of licensing exam. You can also view our education and exam preparation packages here.

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Posted by Kaplan Financial Education - August 14, 2020
How2Securities_10

How to Get Your Series 7 License

What is a Series 7 license? Known as the General Securities Registered Representative license, this license allows you to sell a broad range of securities. A holder is allowed to sell corporate stocks and bonds, municipal bonds, mutual funds, variable annuities, options, direct participation program (DPP) partnerships, and packaged securities (i.e., collateralized mortgage obligations).

The Series 7 is generally preferred by banks and broker dealers for new recruits coming directly into the financial services industry. Those who get this license are officially listed as registered representatives by FINRA, but are more commonly referred to as stockbrokers.

Here are the steps to follow to earn your license.

Step 1: Take and Pass the SIE Exam

The SIE exam tests common topics such as fundamentals, regulatory agencies and their functions, product knowledge, and acceptable and unacceptable practices. You can take the SIE exam before being sponsored by a firm and even while you are still in school. You have a four-year window in which to take and pass any of the representative level top-off exams, like Series 7, after passing the SIE exam. Note that FINRA says that the SIE and Series 7 exams are "corequisites," which does not mean you have to take them at the same time. What FINRA means is that you have to pass both to get your license, but you can take them in any order.

Download "A Candidate's Guide to the SIE Exam" to take your first step toward SIE Exam success.

Step 2: Secure a Sponsorship

To take the Series 7 exam, you must be sponsored by a FINRA member firm or a self-regulatory organization (SRO). Firms apply for candidates to take the exam by filing a Uniform Application for Security Industry Registration or Transfer (Form U4). There is also an exam fee that is commonly covered by the sponsoring firm. 

Step 3: Study for the Series 7 Exam

Once you secure your sponsorship, you can take the top-off exam for the Series 7 license. Most candidates also choose to take the SIE before they take the Series 7, but you can take it first if you prefer and the SIE afterwards.

The licensing exam is not exactly a walk in the park. You need to study with purpose and planning. To help you out, many retail brokerage firms have an in-house training program or, in some cases, they have an agreement with an external training provider. Series 7 study materials go a long way toward helping you pass your Series 7 exam the first time.

The exam consists of 125 multiple-choice questions, and you have 3 hours and 45 minutes to complete it.

The following table shows the major job functions covered by the exam  (1 through 4) with the associated number of questions:

Function Description% of Exam# of Questions
1 - Seeks Business for the Broker Dealer from Customers and Potential Customers7%9
2 - Opens Accounts after Obtaining and Evaluating Customers' Financial Profile and Investment Objectives9%11
3 - Provides Customers with Information About
Investments, Makes Suitable Recommendations,
Transfers Assets and Maintains Appropriate Records
73%91
4 - Obtains and Verifies Customers’ Purchase and Sales
Instructions and Agreements; Processes, Completes
and Confirms Transactions
11%14
TOTAL100%125

 

Step 4: Pass the Series 7 Exam

FINRA makes it easy to enroll for your exams, because they also administer the exams for your NASAA licenses. Simply visit this page

The passing score for the exam is 72%. For more in-depth coverage of these functions and how the exam is set up, check out this article. Once you pass the exam, you have your license.

Series 7 licensing exam prep can really give you the edge you need to pass. Learn more about our live and online study options, and how to purchase a Series 7 exam prep on our website.

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Posted by Kaplan Financial Education - August 14, 2020
Series 7 license holder analyzing investment performance on 6 computer monitors

How to Get Your Series 10 License

The FINRA Series 10 license, known as the General Securities Sales Supervisor Exam—General License is one of two licenses that you must hold if you want to oversee sales activities at a broker-dealer firm. The other license is Series 9. With a Series 10, you can supervise the opening and maintenance of customer accounts and oversee the practices of salespeople and traders. To get your Series 10 license, follow the steps in this article.

Step 1: Pass the SIE exam.

Anyone who wants to earn the Series 10 (and Series 9) must first earn a Series 7 license. To earn the Series 7, you must pass the SIE exam. The SIE tests topics such as securities fundamentals, regulatory agencies, product knowledge, and acceptable and unacceptable practices. You do not have to be sponsored by a firm to take the SIE exam, and you can take it while you are still in school.

Thinking about a career in securities? Download our free eBook, Launching Your Securities Career, to get tips and advice from over 100 securities professionals.

Step 2: Find a sponsor.

To earn the Series 7 and the Series 10 licenses, you must be sponsored by a FINRA member firm or a self-regulatory organization (SRO). Firms apply for candidates to take the Series 7 and 10 exams by filing a Uniform Application for Security Industry Registration or Transfer (Form U4). There is also an exam fee that is commonly covered by the sponsoring firm.

Step 3: Pass the Series 7 exam.

Once you pass the SIE exam and secure your sponsorship, you must pass the Series 7 top-off exam. The exam has 125 multiple-choice questions, and each question has four answer choices. The topics include investment risk, taxation, equity and debt instruments, packaged securities, options, retirement plans, and interactions with clients. Also tested is your knowledge related to the daily activities, responsibilities, and job functions of general securities representatives.

The test time is 3 hours and 45 minutes, and the passing score is 72 percent and above.

Step 4: Pass the Series 10 exam.

The Series 10 exam tests your knowledge of securities rules and regulations in preparing for supervising the sales activities in securities firms. It covers hiring, supervising accounts, regulation, and more. By contrast, Series 9 covers a similar but narrower range of topics and requirements with a focus on options.

The Series 10 exam has 145 multiple-choice questions, and you’re allotted four hours to take it. It focuses on these functions of the general supervisor role:

  • Hiring, Qualifications, and Continuing Education
  • Supervision of Accounts and Sales Activities
  • Conduct of Associated Persons
  • Recordkeeping Requirements
  • Municipal Securities Regulation

The passing score is 70 percent.

Step 5: Register your license.

After you pass your licensing exam, you’ll have to register your Series 10 license with FINRA and an approved broker-dealer who will hold your license and oversee your business for a portion of the commission income. If you haven’t already, you’ll need to take and pass the Series 9 exam and earn that license.

How to Get Started

Series 10 licensing exam prep can give you the edge you need to pass. Visit our website to learn more about our live and online study options and to purchase a Series 9/10 exam prep package.

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Posted by Kaplan Financial Education - August 13, 2020
Get Your Series 10 License Like Man in Photo

Test-Taking Strategies for NASAA and FINRA Exams

Passing securities (FINRA) exams is necessary for aspiring advisers and financial services professionals looking to advance their careers. While each exam has its own topics of focus and format, there are some general test-taking strategies that can help you succeed in all securities (FINRA) exams.

1. Read the Full Question

You cannot expect to answer a question correctly if you do not know what it is asking. Be sure to read the full question before you answer it. Questions are often written in a way to trap people who make assumptions.

2. Avoid Jumping to Conclusions and Watch for Hedge Clauses

Hedge clauses are included in the exam to throw you off. Hedge clauses include terms like if, not, all, none, or except. When you encounter an if statement, the question can be answered correctly only if you take the qualifier into account. If you ignore the qualifier, you will most likely answer the question incorrectly.

3. Look for Key Words and Phrases

Keep your eyes out for words that reveal the situation presented. For example, if you see the word prospectus in a question, you know the question is about a new issue. Take time to identify key terms to answer this type of question correctly.

4. Interpret the Unfamiliar Question

Some questions on the exam will seem unfamiliar at first. If you have studied the materials, you will know the information to answer all of the questions correctly. Often, questions present information indirectly or differently than you are used to seeing it. You may have to interpret the meaning of some elements before you can answer the question. Know that the exam will approach a concept from multiple angles. Text anxiety can trip you up in these situations, so here is some valuable information for overcoming that.

5. Memorize Key Points

Although reasoning and logic will help you answer some questions, others will require you to memorize information. Include memorization of key points in your 90-120 hours of recommended studying.

Taking the SIE exam? Download the free eBook, A Candidate's Complete Guide to the SIE Exam, for valuable information about the test contents and the securities licensing process.

6. Use Information from Prior Questions

Sometimes, information found in one question will help you answer another question. Pay attention to all of the questions as you are going through the exam! You never know when one will help you with another.

7. Define What is Being Asked

Many questions supply so much information that you can lose track of what is being asked. This happens especially with story problems. Take the time to separate the story from the question and identify what is actually being asked.

8. Use a Calculator

Most questions that require calculations are written so that any math needed is simple in nature and function. It is still recommended, however, that you use a calculator so that you do not make easy math errors that lead you to select incorrect answers.

9. Beware of Changing Your Answers

If you are not confident in an answer, your first hunch is the one most likely to be correct. Do not change answers on the exam without a good reason. In general, only change answers if you discover that you did not read the question right or if you find additional helpful information in another question.

10. Pace Yourself

Watch the time carefully when taking the exam. Your time remaining will be displayed on your computer screen, so you will always know how much time you have left. Some people will finish early and others will run out of time. Make sure you pace yourself throughout the exam.

11. Make Sure You Know the Exam Format

Be sure you know what the exam will be like before you go into it. This will help alleviate any external stress on the day of the test. T

If you are looking for more information about what to expect at the testing center, visit our What to Expect on the Day of Your Securities Exam article. 

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If you are looking for an exam prep provider to help you prepare for an upcoming securities (FINRA) license exam, check out Kaplan's securities licensing study solutions. We have study programs to match all learning styles. 

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Posted by Kaplan Financial Education - July 31, 2020
5 professionals who passed their FINRA securities licensing exam

How to Get Your Series 65 License

The Series 65 license, known as the Uniform Investment Adviser Law Examination, qualifies individuals to provide investing and general financial advice to clients. Passing the Series 65 exam qualifies individuals as Investment Advisor Representatives (IARs).

Obtaining the Series 65 license is important for representatives who provide advice on ERISA-regulated retirement accounts.  

How to Get the Series 65 License

Unlike many other FINRA Series exams, the Series 65 exam does not require an individual to be sponsored by a member firm. If you are not Form U4 registered or affiliated with a firm through FINRA’s Web CRD system, you should use the Form U10 to request and pay for the Series 65 exam. There is an exam fee that is commonly covered by the sponsoring firm if you are Form U4 registered, or by the individual if you are not sponsored.

The exam consists of 130 multiple-choice questions, and you have 3 hours to complete it. To pass the exam, you must get at least 94 out of 130 scored questions correct. In other words, you need just over 72% to pass.

Thinking about a career in securities? Download our free eBook, Launching Your Securities Career, to get tips and advice from 100+ securities professionals.

The exam covers four topic areas:

  • Economic factors and business information
  • Investment vehicle characteristics
  • Client investment recommendations and strategies
  • Laws, regulations, and guidelines on unethical business practices

In July 2016, NASAA added new content to the exam to better reflect the skills and knowledge needed to be an IAR today. Some new specifications emphasize the characteristics of different types of investments. Alternative investments were also updated to better reflect the changing marketplace. In addition, new areas were added to highlight the importance of advertising and correspondence with clients, including social media, cybersecurity, data protection, and anti-money laundering.

While the length of the exam and the passing score were not changed, the weighting of the topics and number of questions in each topic area were updated to better reflect the importance of certain knowledge and skills. Visit NASAA to view the most up-to-date content outline.

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Ready to start your Series 65 licensing exam prep? Browse our website to learn more about our live and online study options, and to purchase a Series 65 exam prep package

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Posted by Kaplan Financial Education - July 31, 2020
Investment performance trendline of a Series 65 licensee's computer screen

How to Get Your Series 6 License

The Series 6 license, known as the Investment Company/Variable Contracts Products Limited Representative License, allows you to register as a limited representative with FINRA. With a Series 6 license, you are able to sell mutual funds, variable annuities, variable life insurance, unit investment trusts (UITs), and municipal fund securities.

The Series 6 is often seen as the ideal companion license for those in the insurance industry. Holders are able to expand the financial products and services they offer, as well as increase their level of expertise.

You can get your Series 6 license by following these steps.

Step 1: Take and Pass the SIE Exam

The SIE exam tests common topics such as fundamentals, regulatory agencies and their functions, product knowledge, and acceptable and unacceptable practices. You can take the SIE exam before being sponsored by a firm and even while you are still in school. You have a four-year window in which to take and pass any of the representative level top-off exams, like Series 6, after passing the SIE exam. Note that FINRA calls the SIE and Series 6 exams "corequisites," but they do not mean you have to take both at the same time. Instead, they mean you have to take both to earn your license, and you can take them in any order.  

Download "A Candidate's Guide to the SIE Exam" to take your first step toward SIE Exam success.

Step 2: Secure a Sponsorship

To take the Series 6 exam, you must be sponsored by a FINRA member firm or a self-regulatory organization (SRO). Firms apply for candidates to take the exam by filing a Uniform Application for Security Industry Registration or Transfer (Form U4). There is also an exam fee that is commonly covered by the sponsoring firm.

Step 3: Take and Pass the Series 6 Exam

Once you secure your sponsorship, you can then take the top-off exam for the Series 6 license. Most candidates will choose to take the SIE before the Series 6, but it is also possible to take it after. The exam has 50 questions broken down into four functions:

  • Function 1: Seeks Business for the Broker-Dealer from Customers and Potential Customers, 12 questions, 24% of exam items
  • Function 2: Opens Accounts after Obtaining and Evaluating Customers’ Financial Profile and Investment Objectives, 8 questions, 16% of exam items
  • Function 3: Provides Customers with Information About Investments, Makes Suitable Recommendations, Transfers Assets and Maintains Appropriate Records, 25 questions, 50% of exam items
  • Function 4: Obtains and Verifies Customers’ Purchase and Sales Instructions; Processes, Completes and Confirms Transactions, 5 questions, 10% of exam items

The test time is 1 hour and 30 minutes and the passing score is 70 percent and above.

Step 4: Register Your License

After you pass your licensing exam, you’ll have to register your Series 6 license with FINRA and an approved broker-dealer, who will hold your license and oversee your business for a portion of the commission income.

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Series 6 licensing exam prep can really give you the edge you need to pass. Learn more about our live and online study options to purchase a Series 6 exam prep package in the Securities product section of our website.

 


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Posted by Kaplan Financial Education - July 31, 2020
Series 6 license holder looking at investment performance

How to Get Your Series 9 License

The FINRA Series 9 license, known as the General Securities Sales Supervisor—Options License, is one of two licenses that you must hold if you want to oversee sales activities at a broker-dealer firm. The other license is Series 10. With a Series 9, you can supervise the opening and maintenance of customer options accounts and oversee the practices of options salespeople and traders. To get your Series 9 license, follow the steps in this article.

Step 1: Take and pass the SIE exam.

The SIE exam tests common topics such as fundamentals, regulatory agencies and their functions, product knowledge, and acceptable and unacceptable practices. You can take the SIE exam before being sponsored by a firm and even while you are still in school. You have a four-year window in which to take and pass any of the representative level top-off exams, like Series 6 and Series 7, after passing the SIE exam.

Thinking about a career in securities? Download our free eBook, Launching Your Securities Career, to get tips and advice from over 100 securities professionals.

Step 2: Secure a sponsorship.

The Series 7 license is a requirement for earning the Series 9. To earn both, you must be sponsored by a FINRA member firm or a self-regulatory organization (SRO). Firms apply for candidates to take the Series 7 and 9 exams by filing a Uniform Application for Security Industry Registration or Transfer (Form U4). There is also an exam fee that is commonly covered by the sponsoring firm.

Step 3: Take and pass the Series 7 exam.

Once you pass the SIE exam and secure your sponsorship, you must take the top-off exam for the Series 7 license. The exam has 125 multiple-choice questions, and each question has four answer choices. The topics include investment risk, taxation, equity and debt instruments, packaged securities, options, retirement plans, and interactions with clients. It also tests your knowledge related to the daily activities, responsibilities, and job functions of general securities representatives.

The test time is 3 hours and 45 minutes, and the passing score is 72 percent and above.

Step 4: Take and pass the Series 9 exam.

The Series 9 exam tests your knowledge of securities rules and regulations in preparing for supervising the sales activities in corporate, municipal, and options securities. It covers options sales and trading, as well as regulation and administration. Series 10 goes deeper, covering a similar but broader range of topics and requirements.

The Series 9 exam has 55 multiple-choice questions, and you’re allotted 1 ½ hours to take it. It focuses on four functions of the general supervisor role:

  • Function 1: Supervise the Opening and Maintenance of Customer Options Accounts
  • Function 2: Supervise Sales Practices and General Options Trading
  • Function 3: Supervise Options Communications
  • Function 4: Supervise Associated Persons and Personnel Management Activities

The passing score is 70 percent.

Step 5: Register your license.

After you pass your licensing exam, you’ll have to register your Series 9 license with FINRA and an approved broker-dealer who will hold your license and oversee your business for a portion of the commission income. If you haven’t already, you’ll need to take and pass the Series 10 exam and earn that license.

How to Get Started

Series 9 licensing exam prep can give you the edge you need to pass. Visit our website to learn more about our live and online study options and to purchase a Series 9/10 exam prep package.

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Posted by Kaplan Financial Education - July 13, 2020
Series 9 License - How to Get

Frequently Asked Questions About the FINRA Series 79 Exam

The questions most frequently asked about Series 79—such as what the license is for and Series 79 exam difficulty, passing score, pass rates, questions, and topics—are answered in this article. Read on to get all the information you need to plan for a career in investment banking.

What is the Series 79 License?

The Series 79 license is for investment bankers, enabling them to offer advice on or facilitate public or private debt or equity offerings, mergers or acquisitions, tender offers, financial restructuring, asset sales, and divestitures or corporate reorganization. Administered by FINRA, the Series 79 license is good for the entire period that you work for a FINRA-member firm or self-regulatory organization (SRO). It only expires if you are terminated or leave a firm and do not find employment within two years. Continuing education is required after you earn your license, however.

Thinking about a career in securities? Download our free eBook, Launching Your Securities Career, to get tips and advice from 100+ securities professionals.

What is the difference between the FINRA Series 79 and Series 7 license?

If you hold a Series 79 license, you can engage in the activities of investment banking. By contrast, the Series 7 license enables you to sell corporate stocks and bonds, municipal bonds, mutual funds, variable annuities, options, direct participation program partnerships, collateralized mortgage obligations, and more. Although each is independent of the other, the general industry consensus is that a representative with a Series 7 license who wants to work investment banking should earn the Series 79 license.

What jobs can I get with a Series 79 license?

If you’re interested in a career in investment banking and want to engage in its specific activities, this is the license to have. Officially listed as Investment Banking Limited Representatives by FINRA, Series 79 license holders are usually associates at an investment bank, investment banking analysts, or investment bankers. If you earn this license, you will most likely work in an investment firm or bank. In fact, you need to be employed by a sponsoring FINRA-member firm before you can sit for the Series 79 exam.

How do I earn a Series 79 license?

Earning a Series 79 license involves four key steps:

  1. Take and pass the SIE exam.
  2. Secure a sponsorship from a FINRA-member firm.
  3. Register for the Series 79 exam.
  4. Study for and pass the Series 79 top-off exam.

What is the Series 79 top-off exam?

As part of implementing the Securities Industry Essentials (SIE) exam, FINRA restructured their examination programs. FINRA is the governing body that ensures that anyone who sells securities products is qualified and tested. As part of this restructuring, FINRA created a tailored top-off examination for earning the Series 79 license. You should take the Series 79 top-off exam if you want to be licensed to sell investment banking products.

What are the requirements to sit for the Series 79 exam? Do I need a sponsor?

A FINRA-member firm or SRO must sponsor you to take the Series 79 exam. After you’ve worked for them for four months or more, they can file a Form U4 (Uniform Application for Securities Industry Registration) which registers you for the exam. Fortunately, most firms that hire or train you will have a mandatory Series 79 licensing program included in their training package.

There are no education requirements to sit for the Series 79 exam, although most candidates have a college degree in a finance-related field, and many choose to complete a Series 79 exam prep package before sitting for the exam.

May I take the Series 79 exam before the SIE exam?

Yes, although the more natural progression is to take the SIE exam first, mainly because you don’t have to be sponsored to take it, and it is a more general exam that covers securities concepts. The SIE exam and Series 79 top-off exams are “co-requisites,” which means you can take and pass them in any order. Of course, you have to pass both to earn your Series 79 license.

Do I need to take the Series 79 top-off exam if I already have a different securities license?

It depends. You might not need the Series 79 if you have a Series 7 license, and you want to sell a broader range of securities than those associated with investment banking. However, Series 7 license holders usually earn their Series 79 licenses if they plan to focus investment banking as registered representatives. You should consult with your firm before deciding whether you need a license or not.

Is the Series 79 exam paper or computer-based?

Like all other securities qualification exams, the Series 79 exam is administered by computer at a Prometric testing center.

What are the Series 79 exam dates?

The date of the Series 79 exam is a 120-day window that is opened when a candidate enrolls for the exam. So, after you enroll in the exam, you schedule an appointment with Prometric, and choose an available exam date within that 120-day period. We recommend scheduling your exam session as far in advance as possible to secure your desired Series 79 exam date.

What topics are covered on the Series 79 exam?

The Series 79 exam topics assess an entry-level registered representative’s competency and degree of knowledge associated with carrying out the three critical functions of an investment banking representative. This includes advising on or facilitating debt or equity securities offerings through a private placement or a public offering and mergers and acquisitions. Some of the topics covered are:

  • Analysis of trends in the market, specific industry sectors, individual companies, and the capital structure and valuation metrics of comparable companies
  • Due diligence by identification of information that is required to be disclosed in public or private offering documents Public offerings
  • Underwriting
  • Sell-side and buy-side transactions associated with mergers and acquisitions, tender offers, and closing

How many questions are on the Series 79 exam?

The exam consists of 75 multiple-choice questions, and each question has four answer choices. There are also 10 additional, unidentified and unscored pretest questions that do not contribute to your score that are randomly distributed throughout the exam.

Series 79 exam questions all relate to the three functions shown in this table: 

Sections         % of Exam# of Exam Questions
F1 - Collection, analysis, and evaluation of data49% 37
F2 - Underwriting/New financing transaction, types of offerings and registration of securities27%20
F3 - Mergers and acquisitions, tender offers, and financial restructuring transaction 24%18 
 Total 100%75

 

How much time does it take to study for the Series 79 top-off?

Most candidates spend 60 to 100 hours studying for the FINRA Series 79 exam. If you are looking for some exam study tips, this article about studying for all securities licensing exams has great advice.

How hard is the Series 79 exam?

Candidates must apply their knowledge to specific scenarios related to the three investment banking functions identified as critical by FINRA. The degree of Series 79 exam difficulty, therefore, is quite high. The questions are detailed with a heavy emphasis on data and analysis. So you should expect it to be challenging; however, with dedicated and focused preparation, it is possible.

How much does it cost to sit for the Series 79 exam?

The exam cost is $245.

What is the passing score for the Series 79 exam?

The Series 7 passing score is 73%. What is the passing rate for the Series 79 exam? FINRA announced that the passing rate as of April 2019 was 87%.

If I fail the Series 79 exam, what is the wait time before I can retake it?

Candidates who do not pass the exam must wait 30 days before taking it again. However, if you fail it three times in succession, you must wait 180 days. Your firm will also have to sponsor you again for each retake, and you will have to pay the full fee each time.

Ready to earn your Series 79 license?

We hope this article answers your pressing questions about the Series 79 top-off exam and license. If you’re interested in taking the exam, we have Series 79 exam preparation packages. Or, if you’re just getting started, check out our SIE exam prep packages.

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Posted by Kaplan Financial Education - May 7, 2020
People Answering Series 7 Frequently Asked Questions

Frequently Asked Questions about the Series 63 Exam

The questions most frequently asked about the Series 63 exam—such as exam difficulty, passing score, pass rates, questions, and topics—are answered in this article. Read on to get all the information you need to understand what the license is for and decide if you have to take the exam.

What is the Series 63 License? How long is it good for?

The Series 63 license, also known as the Uniform Securities Agent license, enables you to sell securities in a particular state. If you have a Series 6 or a Series 7 license, and you want to sell securities in the state where you live, work, or plan to work, you must also have a Series 63 license—except in Colorado, Florida, Louisiana, Maryland, Ohio, the District of Columbia, and Puerto Rico. None of these requires the Series 63.

The Series 63 license is good for the entire period that you work for a FINRA-member firm or self-regulatory organization (SRO). It only expires if you are terminated or leave a firm and do not find employment within two years at another FINRA-member firm or SRO.

Thinking about a career in securities? Download our free eBook, Launching Your Securities Career, to get tips and advice from 100+ securities professionals.

What is the difference between the Series 6, Series 7, and Series 63 licenses?

If you hold a Series 6 license, you’re called a limited representative, and you are entitled to sell mutual funds, variable annuities, and insurance premiums in Colorado, Florida, Louisiana, Maryland, Ohio, the District of Columbia, and Puerto Rico. If you’ve earned the Series 7 license, you’re called a registered representative, and you’re permitted to sell corporate stocks and bonds, municipal bonds, mutual funds, variable annuities, options, direct participation program partnerships, and collateralized mortgage obligations in the same states as Series 6. For all other states, you cannot sell any of these assets until you earn your Series 63 license, along with the Series 6, Series 7, or both.

What is the difference between the Series 63, 65, and 66 licenses?

The Series 63, Uniform Securities Agent, is a license for broker-dealer representatives. The Series 65 license, Uniform Investment Adviser, is for investment adviser representatives, which is anyone who works for an investment advisory company and provides investment-related advice for a fee. Holders of the Series 66 license are treated as if they earned both the Series 63 and Series 65 licenses. However, you cannot earn the Series 66 if you do not have a Series 7 license.

What jobs can I get with a Series 63 license?

If you have earned the Series 6 license and the Series 63 license, you can be a financial adviser or insurance agent who also sells mutual funds and works at a brokerage, investment firm, bank, or insurance company. If you have earned the Series 7 license, you can have a career as a stockbroker at a brokerage, investment firm, or bank.

How do I earn a Series 63 license?

Although you can earn the Series 63 license without sponsorship or any prerequisites, we suggest you approach the process in the following order:

  1. Take and pass the SIE exam.
  2. Secure a sponsorship from a FINRA-member firm, and register for the Series 7 exam, Series 6 exam, or both.
  3. Study for and pass the Series 7 exam, Series 6 exam, or both.
  4. Register for the Series 63 exam.
  5. Study for and pass the Series 63 exam.

What is the Series 63 exam? Why should I take it?

The Series 63, Uniform Securities Agent State Law Examination, is the state law test for broker-dealer representatives. It is a North American Securities Administrators Association (NASAA) exam administered by FINRA. You should take the exam if you have a Series 6 license, Series 7 license, or both, and do not live or work in Colorado, Florida, Louisiana, Maryland, New Jersey, Ohio, Vermont, the District of Columbia, and Puerto Rico. Outside of those states, you cannot sell securities without passing the Series 63 exam.

What are the requirements to sit for the Series 63 exam? Do I need a sponsor?

To take the Series 63 exam, you do not need a FINRA-member firm or SRO to sponsor you. You can use a Form U10 (Uniform Examination Request for non-FINRA candidates) to register. However, if you have worked for a FINRA-member firm for four months or more, they can file a Form U4 (Uniform Application for Securities Industry Registration) on your behalf.

There are no education requirements to sit for the Series 63 exam, although most candidates have a college degree in a finance-related field, and many choose to complete a Series 63 exam prep package prior to sitting for the exam.

Is the Series 63 exam paper or computer-based?

Like all other securities qualification exams, the Series 63 exam is administered by computer at a Prometric testing center.

What topics are covered on the exam?

The Series 63 exam topics are:

  • State securities acts and related rules and regulations
  • Ethical practices and fiduciary obligations

How many questions are on the exam?

The Series 63 exam consists of 60 multiple-choice questions. There are 36 questions about state securities acts and their related rules and regulations (60 percent) and 24 questions about ethical practices and fiduciary obligations (40 percent).

How much time does it take to study for the Series 63 exam?

Most candidates spend 30–40 hours studying for the FINRA Series 63. Best practices suggest that you spread those hours over about 10 days.

How hard is the Series 63 exam?

Expect the Series 63 to be challenging, mainly because of the short amount of time you have to complete the questions. You only have 75 minutes, so if you spend more than a minute and 15 seconds on each question, you can fall behind quickly. If you know the material and haven’t crammed, you have a good chance of passing.

How much does it cost to sit for the exam?

The exam cost is $125.

What is the passing score for the exam?

The passing score for the exam is 72 percent. 

What is the pass rate for the exam?

Because the Series 63 is a state exam, questions on the exam vary, and statistics are hard to capture. Therefore, no official pass or fail rate has been recorded. In 2014, the Wall Street Journal did a survey of 370,000 brokers and found that 86 percent passed on their first try. However, the exam changed significantly in 2016, so that percentage might not be accurate by today’s standards.

If I fail the Series 63 exam, what is the wait time before I can retake it?

Candidates who do not pass the exam must wait 30 days before taking it again. However, if you fail it three times in succession, you must wait 180 days.

Ready to earn your Series 63 license?

We hope this article answers all of your questions about the Series 63 exam and license. If you’re interested in taking the exam, check out our Series 63 exam preparation packages.

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Posted by Kaplan Financial Education - May 7, 2020
Series 63 FAQ - stockbroker

How to Become a Licensed Stockbroker

If you’re majoring in finance or a related degree, or you are working in the financial sector, you might be considering a career as a stockbroker. Buying and selling stock and other securities on behalf of clients is a rewarding and gratifying profession, but it requires at least two licenses. This article explains each stockbroker license and then walks you through the process of how to become a licensed stockbroker.

Stockbroker License Overview

Technically, there are only two licenses that are absolutely required for stockbrokers. However, your employer might require or recommend that you earn others as part of your responsibilities. Here’s a rundown of them all:

  • Series 7: Administered by FINRA and known as the general securities representative license, this authorizes you to sell virtually any type of individual security, such as preferred stocks, options, bonds, and other individual fixed income investments—plus all forms of packaged products. Basically, this license enables you to sell everything except commodities futures, real estate, and life insurance.
  • Series 63: Administered by NASAA, Series 63 is known as the Uniform Securities Agent license. Along with the Series 7 license, you must hold this license to do business as a stockbroker or sell mutual funds in many states.
  • Series 3: If your employer wants you to sell commodity futures contracts, you need this license, also administered by FINRA.
  • Series 31: To sell managed futures, which are pooled groups of commodities futures, you’ll need this license, an offshoot of the Series 3 license.
  • Series 65: Financial planners or advisors who work for an hourly fee rather than a commission and stockbrokers and other financial representatives who deal with managed-money accounts need this license. It’s also administered by NASAA.
  • Series 66: If you have a Series 7 license, you have already been tested on a good portion of the topics covered on the Series 65 exam. Therefore, Series 66 rolls Series 63 and Series 65 content into one license so you don’t have earn the others separately.

Thinking about a career in securities? Download our free eBook, Launching Your Securities Career, to get tips and advice from 100+ securities professionals.

The Steps to Becoming a Licensed Stockbroker Here’s what you need to do to become a licensed stockbroker:

  1. Sit for and pass the SIE exam. The SIE exam tests common topics such as fundamentals, regulatory agencies and their functions, product knowledge, and acceptable and unacceptable practices. You can take the SIE exam before being sponsored by a firm and even while you are still in school. Note that although you have to pass both the SIE and Series 7 exams to get your Series 7 license, you can take them in any order.
  2. Secure sponsorship with a licensed firm. Once you’ve passed the SIE exam and you’re employed, your firm must file a Uniform Application for Securities Industry Registration or Transfer, also known as Form U4, to enable you to earn your Series 7 license.
  3. Register for the Series 7 exam. Your sponsoring broker is required to file an application for you through FINRA’s CRD system. FINRA’s approval of that application opens a 120-day testing window. FINRA suggests you schedule your exam as far in advance as possible to ensure you get your desired date.
  4. Study for and pass the Series 7 exam. The Series 7 exam is not exactly a walk in the park. Study with purpose and planning. Exam preparation and review courses go a long way toward helping you pass your Series 7 exam the first time. The exam consists of 125 multiple-choice questions, and you have 3 hours and 45 minutes to complete it. The passing score is 72 percent.
  5. Register for the Series 63 exam. The Series 63 exam does not require member firm sponsorship. You can use Form U10 to apply for the Series 63 exam if you are not sponsored.
  6. Study for and pass the Series 63 exam. Prepare for the Series 63 exam in the same way you prepared for the Series 7 exam. Consider Series 63 exam study materials and review packages to improve your chances of passing. The Series 63 has 65 questions and lasts for 75 minutes. The passing score is 73 percent.
  7. Register, study for, and pass additional exams. Either find out from your employer or decide for yourself any other licenses you need to earn, and then prepare for them like you did for Series 7 and Series 63.

Additional Tips for Success

If you want to become a licensed stockbroker, here are some extra tips to help you succeed:

  • If you are still in college or are about to enter college, consider majoring in financial planning, business, finance, economics, or accounting as an undergraduate and possibly continue these studies in graduate school.
  • Complete an internship. Many brokerage firms and investment banks accept summer interns. Internships help you understand the career and, in some cases, they can serve as an extended job interview.
  • Find a job in a brokerage, asset management firm, or bank. Because you can’t register for the Series 7 exam without a sponsor, you need to be employed before you take the exam.
  • Make sure you can pass a background check, which typically consists of a credit check and a criminal background search. Many employers will use these checks as a condition of employment.
  • As part of your study plan for each license exam and the SIE exam, take a practice exam after you’ve read the materials and answered practice questions. A practice exam closely replicates the degree of difficulty, weighting, and format of the real exam, and you receive a score with diagnostic feedback. The better you perform on a practice exam, the greater your likelihood of passing your licensing exams.
  • Stay calm on exam day. Plan to arrive at the testing center more than 30 minutes beforehand so that you have plenty of time to check in, find where you are supposed to go, and collect your thoughts. During the exam, take the questions one at a time and don’t look ahead to others or second-guess yourself.

Ready to Get Started on the Path to Becoming a Licensed Stockbroker?

Exam preparation packages for the SIE, Series 7, and Series 63 can help increase your odds of passing these critical exams on your way to becoming a licensed stockbroker.

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Posted by Kaplan Financial Education - March 20, 2020
Stockbroker license conceptual photo

What Is a Registered Representative?

“Registered representative” is a term that describes someone who is licensed to buy and sell securities for clients and is sponsored by a firm registered with the Financial Industry Regulatory Authority (FINRA). Registered representatives are more commonly referred to as stockbrokers. This article explains what a registered representative does and details the difference between an investment adviser representative and a registered representative. You'll also learn the steps you need to take to become a registered representative.

What a Registered Representative Does

Registered representatives represent clients in the trading of investment products such as stocks, bonds, and mutual funds. Many handle complicated trades or complex products that are outside the capabilities of online trading. Well-versed in the markets, they search for the best securities and prices possible so they can advise clients on what to buy and sell, as well as the best times to trade. In return, they receive either a flat fee or a percentage of the transaction value as a commission. Therefore, a registered representative is adept at sales and working with people.

Registered representatives must follow standards and rules set by FINRA and the SEC, as well as the suitability standard. The suitability standard requires that a registered representative recommend only the securities that meet client requirements and goals and complement their portfolios. However, if a registered representative finds an investment product that will make the client money, they can recommend a trade, even if it doesn’t meet the client’s financial goals or appetite for risk.

Thinking about a career in securities? Download our free eBook, Launching Your Securities Career, to get tips and advice from 100+ securities professionals.

Registered Representative vs. Investment Adviser Representative

An investment adviser representative (IAR) is an individual who works for an investment advisory company or firm and provides investment-related advice for a fee. The advice IARs can provide is based on the licenses they hold. IARs are usually asset managers, investment counselors, investment managers, portfolio managers, and wealth managers. Many have Series 65 licenses.

By contrast, registered representatives work with broker-dealers or brokerage firms, buying and selling securities stocks, bonds, mutual funds and certain other investment products on behalf of customers or for their firm’s own accounts, or both. The securities licenses most commonly associated with registered representatives are Series 7 and Series 63.

How to Become a Registered Representative

Here are the steps to becoming a registered representative:

  1. Sit for and pass the SIE exam. This exam, which tests security industry essential concepts, gets you started on the path to earning your Series 7 and Series 63 licenses.
  2. Secure employment with and sponsorship from a FINRA-licensed firm.
  3. Register and prepare for the Series 7 exam. Your sponsoring broker is required to file an application for you through FINRA’s CRD system. FINRA’s approval of that application opens a 120-day testing window. You should schedule your exam as far in advance as possible to ensure adequate preparation time and to get your desired date.
  4. Sit for and pass the Series 7 exam.
  5. Register for, prepare for, sit for, and pass the Series 63 exam.

After you complete these steps, you will be licensed and sponsored to buy and trade securities for individual clients, your firm, or both.

Thinking of Becoming a Registered Representative?

A career as a registered representative is hard work, but it is satisfying and rewarding. Sitting for the SIE exam is a great way to start, and SIE exam preparation packages can increase your chances of passing. Another option is to enroll in an SIE and Series 7 exam preparation bundle, which will ultimately save you money in the long run.

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Posted by Kaplan Financial Education - February 24, 2020
Registered representatives at work

How Much Money Do Financial Advisors Make?

What kind of salary can you earn as a financial advisor? PayScale lists the salary range for financial advisors as $36,000–100,000 per year; however, the earning potential over time is even greater than that. Why the big range? It all comes down to what kind of financial advisor you are. Here are some examples.

Stockbroker Salary (Registered Representative Salary)

Stockbrokers, which FINRA calls registered representatives, are financial advisors who work at brokerages, managing the financial portfolios of individuals or corporate clients. According to the U.S. Bureau of Labor Statistics (BLS), the median salary in 2018 for a stockbroker was $64,120 per year. However, because stockbroker pay is commission-based (after a certain sales threshold), they have the opportunity to earn much more than that. According to the Street, the median pay for the top 10 percent of all stockbrokers in the U.S. is $208,000.

If you’re interested in becoming a stockbroker or registered representative, you’ll need to earn securities licenses from FINRA. These include the Series 7 and Series 63 licenses.

Considering a career in securities? Download the free Launching Your Securities Career eBook.

Investment Advisor Salary

Working for a financial investment firm, financial planning firms, or themselves, investment advisors determine the best investments for a client’s portfolio. According to Payscale, the average annual salary of an investment advisor is $70,797. However, like that of stockbrokers, investment advisor pay can include commissions and profit-sharing, increasing the annual salary. For example, in Chicago, the salary plus commissions and other add-ons can average $234,700, according to a 2018 CFA Society Chicago report.

If becoming an investment advisor appeals to you, you’ll need a Series 65 license, which enables you to work with clients as an Investment Advisor Representative.

Financial Planner Salary

“Financial planner” is a broad term for a type of financial advisor who helps individuals and corporations meet their long-term financial objectives. They generally charge their clients a percentage of the assets they manage. They may also charge an hourly fee or get fees for stock and online insurance policies purchased. Those who help individuals with planning are referred to as “personal financial advisors.” Many of these financial planners are certified CFP® professionals.

According to ZipRecruiter, the median pay for a professional with the CFP® certification is $85,449 annually, topping out at $149,500. The U.S. BLS states that the median pay for a professional under the larger umbrella of personal financial advisors is $88,890 annually, and Payscale adds that, at the high end of the scale, the salary is $122,000.

Wealth Manager Salary

A wealth manager is a type of financial advisor who consults with high-net-worth clients to achieve their goals related to wealth accumulation, protection, and distribution. High-net-worth clients generally refer to those worth $1 million or above, although some firms only serve clients worth at least $5–10 million. Salary.com estimates that the average salary range for wealth managers is $63,975–93,420 annually. However, wealth managers have the potential to earn much more, especially as they gain experience or if they work for major broker-dealers. According to a number of articles, wealth managers in that category can bring home $2 million annually.

Designations offered in wealth management are many and varied. Examples include Wealth Management SpecialistSM, Accredited Portfolio Management AdvisorSM, the CFP® certification, and the CFA® charter. If wealth managers are providing investment advice or selling securities, they will also need (at minimum) Series 65, Series 6, and Series 7 licenses.

Interested in Making Money as a Financial Advisor?

If you put in the time and hard work to earn your securities licenses or CFP® certification, you increase your odds of earning a top salary as a financial advisor. Securities prelicensing exam preparation packages and CFP® education help increase your odds of earning the licenses and certification that can get you started on the path to financial success.

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Posted by Kaplan Financial Education - January 30, 2020
Financial advisor salary calculated by woman

The SECURE Act: Which Investors Are Affected and How?

It has been several decades since the last major piece of retirement legislation made its way to the President’s desk. With the president’s signature on December 20, 2019, the Setting Every Community up for Retirement Enhancement (SECURE) Act makes many small improvements to existing retirement savings options that, collectively, add up to a significant change. Additionally, the act contains a few provisions not tied to retirement planning, but of interest to financial advisers and their customers.

The act originally passed out of the House in May on a 417-3 vote. It was expected to sail through the Senate and make its way to the President’s desk quickly. A few senators wanted a provision or two added to the bill and blocked passage. After some negotiation, the act passed through the Senate as part of a spending bill and was signed into law.

The SECURE Act brings change to a number of investors, including:

  • Those saving for retirement
  • Those nearing or in retirement
  • Employers with or considering retirement plans for their workforce
  • Expectant parents
  • Those saving or paying for education
  • And several other minor provisions

Saving for Retirement

  • Current law prohibits contributions to traditional Individual Retirement Accounts (IRAs) after the age of 70 ½. Beginning with the tax year 2020, this rule is removed. As long as a person has earned income, they may continue to contribute to a traditional IRA.
  • Employers who provide a 401k plan for their employees are required to include employees that are age 21 and have worked 1,000 hours or more in the prior 12 months. Beginning in 2021, employers must also include part-time workers. A part-time worker is defined as having worked 500 hours or more for three consecutive years and 21 years old by the end of the three-year period.
  • New provisions will make it easier for employers to offer annuities within 401k plans. It is likely that more annuities will be made available within 401k plans as pay-out options for retirees.

Nearing or in Retirement

  • Beginning for the tax year 2020, IRA owners must begin to take Required Minimum Distributions (RMD) from their IRAs beginning at age 72. The current requirement is to begin to take these distributions beginning at age 70 ½. This rule does not apply to those that have already reached 70 ½ by the end of 2019.
  • Those who inherit an IRA have been able to choose an RMD payout based on their life expectancy. With a younger person, this could result in very small RMDs and accounts that payout for very long periods of time. This is popularly known as a “stretch IRA” and was a popular estate planning tool. However, this rule is changing. For IRA owners who die after the end of 2019, their beneficiaries must take their distributions over a period of 10 years, effectively eliminating the stretch IRA option. If a stretch IRA is part of your clients’ estate plans, it is time to find a new strategy.

Employers

  • Small companies (and their employees) have struggled to afford retirement plans for their employees. New rules under the SECURE Act allow the creation of Multiple (or Pooled) Employer Plans (MEPs). Two or more separate employers may join together to offer a retirement plan to their employees. These MEPs may be formed starting on January 1, 2021.
  • The Act increases the company tax credit for starting a retirement plan and allows the credit in each of the first three years of the plan.
  • Part-time employees may now be included in plans, and there are new rules for offering annuities in employer-sponsored plans.
  • Qualified automatic contribution arrangements may be increased over time to as high as 15 percent (the current cap is 10 percent).
  • There are several other new rules for employers. Most of these changes are designed to enhance retirement savings. If you are an employer, then you should talk to your plan adviser about changes that affect your company. If you are an adviser, then you should be ready for those phone calls.

Expectant Parents

  • The SECURE Act allows for a tax-free withdrawal from IRAs and other retirement plans for the birth of a child without the distribution being subject to a 10 percent penalty. The withdrawal may be up to $5,000, and married couples may each take out $5,000. The distribution must be taken within the first year of the child’s birthday. Income taxes are still due on the distribution but without a penalty.
  • The Act extends the same penalty-free withdrawal for costs associated with adopting a child.

Education Savings

  • The definition of “qualified education expenses” now includes fees, books, supplies, and equipment needed for apprenticeship programs and certifications.
  • Up to $10,000 of 529 funds may be used to pay down student loans for the account beneficiary, plus an additional $10,000 for each of the beneficiary's siblings.

There are other provisions to the SECURE Act, but the above are the parts that are most likely to appear on industry qualifying exams. If you are taking an exam after January 1, 2020, be sure to review when these different rules become effective. You can expect test questions for the new rules to appear along with their effective dates. If you are an adviser, then you should get up to speed on the SECURE Act and the changes it brings to your clients and customers.

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Posted by Jim Heitman, Content Specialist - January 6, 2020
SECURE Act Discussion with Client

What is the SIE Exam Passing Rate?

If you’re taking the FINRA Securities Industry Essentials (SIE) exam, you might be wondering about the passing rate. And you probably want to know how hard the exam is. Although more than three-quarters of those who sit for the SIE exam end up passing it, it’s still challenging. Let’s take a look at the data and then see what you can do to increase your chances of passing.

SIE Exam Passing Rate

You need a score of 70% or better to pass the SIE. As of August 31, 2019, the overall passing rate of the SIE exam was 82% out of 67,445 exams administered. Of the 58,264 candidates who were taking it for the first time, the pass rate was 74%. The rates for those taking the SIE with the Series 6, Series 7, and Series 79 exam were as follows:

  • SIE and Series 6: 80%
  • SIE and Series 7: 84%
  • SIE and Series 79: 96%

Thinking about taking the SIE exam? Our free Candidate's Complete Guide to the SIE Exam is packed with useful information.

How Hard Is the SIE Exam?

The SIE exam is not easy. You should be prepared for a challenge. You are expected to know about capital markets, securities products, and regulations, as well as how to trade securities and what products are prohibited.

Although the exam requires some math and a few calculations, mostly you are being tested on how well you read the exam questions and your understanding of finance and securities concepts. Knowing definitions will not be enough. You should also be prepared for one word being used to mean different things and, conversely, several different words being used to mean the same thing. For examples and more details, read our article on frequently encountered SIE exam roadblocks.

Despite the challenges, you can be part of the 82% passing rate if you know the topics and prepare properly.

SIE Exam Questions and Topics

The SIE exam consists of 75 multiple-choice questions plus 10 unscored questions, and you have an hour and 45 minutes to complete it. The topics and the number of questions assigned each are:

  1. Knowledge of Capital Markets: 12 (16% of the exam)
  2. Understanding Products and their Risks: 33 (44% of the exam)
  3. Understanding Trading, Customer Accounts, and Prohibited Activities: 23 (31% of the exam)
  4. Overview of the Regulatory Framework: 7 (9% of the exam)

As you can see, the second and third sections make up 75% of the exam, so you need to do well on both those sections. But don’t overlook the other two. They are important because you will need to know how to apply those concepts in future securities licensing exams.

SIE Exam Study Tips—How to Increase Your Odds of Passing

These tips will help you develop the knowledge and confidence necessary to increase your odds of passing:

  • Layout a study plan. Use the SIE Exam Content Outline from FINRA as a starting point. An SIE exam prep package is even more helpful for developing your study plan and determining how many hours to study. Because the SIE exam was just implemented in October 2018, guidance on how many hours of study to put in varies widely. Some say 20 hours. Others say 100-150 hours. Kaplan advises no less than 50 hours, and you should add more hours if you don’t have a financial background.
  • Develop a steady, regular study routine. A routine can increase your retention dramatically. Balance your studying between reading and practicing with breaks in between that enable concepts (and how to apply them) to percolate. Relying solely on frantic cramming a few days before the exam is not recommended because you aren’t tested on memorization.
  • Be sure you have a thorough understanding of finance and the markets, and are keeping up with trends. Take some extra study time to listen to podcasts or youtube videos about investing. Subscribe to updates from financial news sources online. Visit online discussions of finance, the stock market, and securities on quora and reddit. Build your confidence by answering practice questions and taking practice exams.
  • Practice questions and exams enable you to assess how well you understand and apply critical concepts. You’ll be able to address weaknesses and become accustomed to the kinds of questions you’ll be asked on the exam.

Ready for the Challenge?

If you’re interested in taking the exam, check out our SIE exam preparation packages. You can also find answers to the most commonly asked questions about the exam in this SIE FAQ.

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Posted by Kaplan Financial Education - October 16, 2019
SIE Exam Passing Rate Celebrated by 4 Students

I Failed the Series 7 Exam: Now What?

So, you failed the Series 7 exam. You might be a little down right now, but you don’t need to feel that way for long. Most brokerages and investment firms offer you at least two opportunities to pass the exam and get your license. So, sign up for a retake. If you think positively as you prepare and follow the six tips in this article, you can increase your odds of success when you take the exam again.

Failing the Series 7: The Good News

Yes, there’s good news. You have already put in a great deal of study time, so it’s unlikely you need to study that much again. Also, you don’t have to fear losing what you learned because of long cycles between exam dates. You can retake the exam as early as 30 days after you fail. For these reasons, it should be much easier to balance your work, family, and study commitments this time around.

You are also likely to have learned what your weak spots were based on how you felt about the questions when you took it the first time. In addition, you probably won’t feel as anxious and panicky on exam day, which could cost you a passing score, because you now know what you can expect. Unsure about how to prepare for your retake? Here are six tips that can increase your odds of passing when you take it again.

Download our free eBook, Launching Your Securities Career, to get tips and advice from more than 100 successful securities professionals.

1. Take time to reflect on why you failed the Series 7 exam.

What were the reasons you failed? Did you feel the questions were more in-depth than you expected or that the questions focused on topics that were unfamiliar? Did you have high scores for certain types or categories of practice questions, only to find that the exam had different kinds? Did you rush your study time, perhaps only putting in a week or so of study right before the exam? Maybe you thought you didn’t need an exam prep package or practice. Don’t feel embarrassed if one (or more) of these is why you didn’t pass because these are all common reasons for failing. In fact, it’s good to be honest, because that can guide your study plan for the retake.

2. Create a study plan based on why you didn’t pass.

Now that you’ve done an inventory of what might have caused you to fail the Series 7, you can create a study plan to address your issues. If you didn’t put in enough hours, make sure your plan includes them this time around. If you sailed through some topics and stumbled on others, focus on the ones that tripped you up. However, you should also make sure that you dedicate some time to reviewing the others just to keep them fresh in your mind. If you tried to “go it alone,” consider investing in a Series 7 test prep this time around.

3. Make sure that your study materials are up-to-date.

Securities rules and regulations change frequently and test topics can reflect them almost just as fast. Try to keep up with the latest information from FINRA, starting with their notices web page. Check to make sure that any guides you have or review packages you purchased are based on the most recent information. Although some providers update their packages and guides regularly, it’s good to do a little homework to make sure that what you’re studying is current.

4. Start studying as early as you can.

You can’t cram for the Series 7. If you tried that last time, it is most likely the main reason why you didn’t pass. So, get in a study routine early. A steady, regular study method will increase your retention dramatically. And if you didn’t cram, good for you, but you should still start studying as soon as you can. You will some breaks to let concepts percolate. Also, you'll need time to sleep, because that’s very important for peace of mind on exam day.

5. Take practice exams.

Some test takers fail the Series 7 exam because they spend too much time on reading and memorizing calculations and concepts. In this article that lists 7 strategies for passing the Series 7 exam, it says to balance studying between manuals and practice questions, which is sound advice for first-time exam takers. For this second time around, you should practice much more than you read. You should take practice exams, which closely replicate the real exam in degree of difficulty, weighting, and format. Most are updated to address the latest regulations, and you receive a score with diagnostic feedback.

6. Read the whole question.

You’d be surprised at how many people failed the Series 7 because they missed something important in some of the questions. So, for each question, be sure you read it in its entirety and don’t start to answer until you’ve also read all the answer choices. Then read the last sentence of the question again before starting to eliminate answers. Here’s another valuable tip: if you have read the question thoroughly, and there are at least two answer choices you cannot eliminate, consider choosing “all of the above” if it’s an option.

Ready to give it a try again?

If you failed the Series 7 exam the first time, remember that it’s a challenging exam, and you are not alone. If you follow the tips in this article and invest in exam preparation packages and study tools, you will improve your odds of passing it on your second try.

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Posted by Kaplan Financial Education - September 16, 2019
Man Who Failed Series 7 But Retook it and Passed

How Hard is the FINRA Series 7 Exam?

How hard is the Series 7 exam? FINRA designed it to test Series 7 license candidates on how well they can apply their knowledge of securities concepts to specific scenarios. It is a corequisite of the SIE exam, which tests you on general securities topics. By contrast, the questions on the Series 7 exam are detailed and related to the day-to-day activities, responsibilities, and job functions of stockbrokers. Therefore, it can be considered a challenging exam. In this article, we’ll share the details, including Series 7 pass rates and topics, and how to improve your odds of success.

Series 7 Pass Rate

At the FINRA 2019 annual conference, it was announced that from October 1, 2018 to March 31, 2019, 10,542 individuals sat for the exam, and the Series 7 pass rate for that period was 71 percent. That rate applies only to those who passed both the SIE exam and the Series 7 exam. FINRA also reported that this pass rate was better than those from before October 1, 2018, when the SIE was introduced. However, this improvement was just a few percentage points and factors in a 74 percent rate for the SIE alone. Therefore, the exam is still no walk in the park.

Thinking about a career in securities? Download our free eBook, Launching Your Securities Career, to get tips and advice from 100+ securities professionals. 

Series 7 Exam Questions and Topics

The Series 7 exam consists of 125 multiple-choice questions, and each question has four answer choices. The topics include investment risk, taxation, equity and debt instruments, packaged securities, options, retirement plans, and interactions with clients. The focus of the exam is the nature of these securities and financial instruments, and it tests knowledge relevant to the day-to-day activities, responsibilities, and job functions of general securities representatives. The 125 questions are broken into four sections as shown in this table:

SectionWeightQuestions 
1 - Seeks Business for the Broker-Dealer from Customers and Potential Customers7%
2 - Opens Accounts after Obtaining and Evaluating Customers' Financial Profile and Investment Objectives9%11
3 - Provides Customers with Information About Investments, Makes Suitable Recommendations, Transfers Assets and Maintains Appropriate Records73%91 
4 - Obtains and Verifies Customers’ Purchase and Sales Instructions and Agreements; Processes, Completes and Confirms Transactions11%14 
Total 100%125 

 

As you can see, the third topic dominates the Series 7 exam curriculum. Therefore, it is essential that you have a firm grasp on how to provide investment information and recommendations to customers, how to transfer assets, and how to maintain appropriate records. You should keep this in mind as you study.

Series 7 Exam Study Tips—How to Increase Your Odds of Success

The Series 7 exam is not easy. It requires a significant investment of time to be successful. Proper preparation is the key. These tips will help you develop the knowledge and confidence necessary to increase your odds of passing:

  • Develop a solid study plan and stick to it: You need to spend 80-100 hours studying for the FINRA Series 7 exam if you have a finance background and about 150 if you don’t. The first thing you should do is lay out a study plan that ensures you put those hours in. Give yourself enough time to take breaks from study to let concepts percolate. Consider making a Series 7 preparation package part of your plan.
  • Set a routine early: A steady, regular study method will increase your retention dramatically compared to frantic cramming at the end. Balance your studying between manuals and practice questions so you don’t burn out on either. Be sure to take a day off to rest your mind when you need to.
  • Focus on learning concepts: Most of the exam questions will test how you incorporate all your knowledge about securities and financial instruments to make suitable recommendations for a hypothetical client. For that reason, understanding concepts and how to apply them should be your focus, not memorizing formulas.
  • Practice, practice, practice: There is no better way to build your confidence ahead of the Series 7 exam than by doing practice questions. You should also take practice exams. Both types of exam practice help you truly assess your comprehension of critical concepts, identify and address weaknesses, and get comfortable answering the kinds of questions you’ll face on exam day.

Read this article on Series 7 study strategies for more details about preparing for the exam, including what to do on exam day.

Ready for the Challenge?

If you’re interested in taking the exam, check out our Series 7 exam preparation packages. Or, if you’re just getting started, we offer SIE packages and an SIE and Series 7 combo series.

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Posted by Kaplan Financial Education - August 26, 2019
Students wondering how hard is the Series 7

What’s the Difference Between Series 7 and the CFA® Charter?

Working in a brokerage or an investment firm is a popular choice for those who want a career in finance. Having a FINRA Series 7 license or a CFA® charter can be beneficial to anyone interested in working in that area of finance. So, you might be wondering what’s the difference between the Series 7 license and the CFA charter? This article breaks down both, including what they are, how to get them, what’s on the exams, and more to help you determine which you should earn.

The FINRA Series 7 license

The FINRA Series 7 license, also known as the General Securities Registered Representative license, allows you to sell corporate stocks and bonds, municipal bonds, mutual funds, variable annuities, options, direct participation program partnerships, collateralized mortgage obligations, and more in the United States. It’s administered by the Financial Industry Regulatory Authority (FINRA), which regulates member brokerage firms and exchange markets.

To earn the Series 7 license, you must pass two exams: the Series 7 exam and its corequisite, the Securities Industry Essentials (SIE). The SIE focuses on the basic information anyone in securities should know, but the Series 7 license requires specific knowledge. Therefore, you may hear it referred to as a “top-off exam.”

Thinking about a career in securities? Download our free eBook, Launching Your Securities Career, to get tips and advice from 100+ securities professionals.

How to get your Series 7 license

These are the steps for getting your Series 7 license:

  1. Pass the SIE exam. No degree or work experience is required to take this exam. The majority of candidates have a college degree or are in the process of earning one, however.
  2. Secure a sponsorship with a FINRA-member firm. After you work for a FINRA-member firm, they indicate that they are sponsoring you by filing a special application called a Form U4 which registers you for the exam.
  3. Take and pass the FINRA Series 7 license exam. Like the SIE, there are no degree or work requirements, but most candidates have a college degree in a finance-related field.

How to prepare for the FINRA Series 7 license exam

The recommended number of hours of study ranges from 80-100 to prepare for the FINRA Series 7 exam if you have a finance background and about 150 hours if you don’t. You should expect the exam to be challenging. Series 7 exam preparation classes are recommended as part of the preparation process, along with making a study plan, focusing on learning concepts, using practice questions, and taking practice exams.

About the FINRA Series 7 license exam

Series 7 exams are administered by Prometric throughout the year, and the fee for the exam is $245 USD. After your sponsor submits the Form U4 application, FINRA opens up a 120-day window, and you can take the computer-based, multiple-choice exam at a Prometric testing center on one of the days in that window. The format of the exam changed in October 2018, so pass rates for the new version are not available yet, but the general report is that it is around 72 percent.

Those who sit for the FINRA Series 7 exam can expect to be tested on investment risk, taxation, equity and debt Instruments, packaged securities, options, retirement plans, and interactions with clients.

The CFA® Charter

The CFA Charter is a professional credential offered internationally by CFA Institute to investment and financial professionals; it is an abbreviation for Chartered Financial Analyst®. The program covers a broad range of investment and portfolio management, financial analysis, stocks, bonds, and derivative topics, and it provides a generalist knowledge of other areas of finance. To earn the charter, you must take and pass all three levels of the CFA Program exam.

How to get the CFA® Charter

These are the steps for getting the CFA designation:

  1. Earn a bachelor’s degree (or equivalent) or be in the final year of your bachelor’s degree program. If you have 4 years of relevant work experience or a combination of professional work and university experience that totals 4 years, you are also eligible to start the CFA Program.
  2. Take and pass the Level I, Level II, and Level III CFA Program exams.
  3. Become a member of CFA Institute (which costs $275 USD and includes agreeing to abide by its code of ethics).
  4. Provide CFA Institute with proof that you’ve been working full-time for 2 years in a role that either involves investment decision-making or with a product that contributes to that process. This can include any work experience you had before passing the exam, as well as after.

How to prepare for the CFA® Program exam

CFA Institute advises spending a minimum of 300 hours of studying to prepare for each level of the CFA Program exam. CFA Institute offers Learning Outcome Statements (LOS) that detail exactly what you are expected to do on exam day, so they should be your main area of focus. It helps to take CFA Program exam preparation classes and answer as many practice questions as you can. To familiarize yourself with the exam process, take several mock exams as well.

About the CFA® Program exam

All three levels of the CFA Program exam are offered in June, and you can also sit for Level I in December. This is quite a difference from the FINRA Series 7 exam. The main format is multiple-choice, although Level III has a written portion called constructed response, too. The fees for each level range from $650–$1380 USD, depending on when you register. There is also a one-time enrollment fee of $450 USD. As for the pass rates, they look like this: Level I: 43 percent (May) and 45 percent (December); Level II: 45 percent; and Level III: 56 percent.

For all levels of the CFA Program exam, you will be tested on ethical and professional standards, quantitative methods, economics, financial reporting and analysis, corporate finance, equity valuation, alternative investments, fixed income, derivatives, and portfolio management.

Now that you know about each, let’s look at how to decide which is right for you.

Which is right for you—the FINRA Series 7 license or the CFA® Charter?

Another difference between the two credentials is that the Series 7 license is mandatory for anyone who wants to sell securities in the U.S., but the CFA Charter is an optional designation that demonstrates mastery of finance topics. So, which designation to pursue really depends on what you want to do in your career. If you want a career selling stocks in a brokerage, investment firm, or bank, then not only is the FINRA Series 7 right for you, but it is also required. With a CFA charter, you can pursue a number of career opportunities such as portfolio manager, research analyst, consultant, risk manager, corporate financial analyst, financial adviser, and the C-suite.

Of course, you don’t have to choose at all. Having both designations opens more doors in your career, especially if stocks and other securities investment products are your passion. Many Series 7 license holders who become investment advisor representatives or set up registered investment advisor firms have found that holding the CFA charter is beneficial to their business and clients. And, quite a few CFA charterholders who take staff positions in the research departments of brokerages will go on to earn their Series 7 licenses.

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Posted by Kaplan Financial Education. - June 27, 2019
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FINRA Moves to Prometric as Single Vendor for Securities Qualification Exams

As of January 1, 2018, the Financial Industry Regulatory Authority (FINRA) has chosen Prometric as the single vendor to deliver its many securities qualification examinations (learn which exams Kaplan can prepare you for here).

Historically, FINRA has provided two vendors: Pearson VUE and Prometric. The last day anyone was allowed to sit for a FINRA exam at a Pearson VUE testing center was December 31, 2017.

If a candidate did not pass an exam at a Pearson VUE testing center by December 31, 2017, they are only allowed to reschedule with a Prometric testing center.

Thinking about a career in securities? Download our free eBook, Launching Your Securities Career, to get tips and advice from 100+ securities professionals.

Prometric complies with the Americans with Disabilities Act (ADA) by supporting testing accommodations or modifications. However, the candidate must submit an accommodation request to FINRA for review and approval. If FINRA approves the accommodation, it will then let Prometric know before the appointment.

Those securities professionals who have previously taken examinations at Pearson VUE need not worry about their testing records, as they are maintained by FINRA. If a copy of a score report for a test taken at Pearson VUE is needed, contact FINRA at (800) 999-6647. 

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Posted by William James, Senior Content Specialist - April 19, 2019
Woman sitting for Securities Licensing Exam

Frequently Asked Questions About the FINRA Series 7 Exam

If you're preparing to sit or study for the FINRA Series 7 Securities licensing exam, you've probably got some questions. This article answers the most frequently asked questions about the Series 7 top-off exam and license, equipping you with the information you need to plan for this next step in your career.

What is the Series 7 License?

Also known as the General Securities Registered Representative license, the Series 7 license is administered by FINRA. FINRA is the governing body that ensures that anyone who sells securities products is qualified and tested.  If you hold this license, you can sell corporate stocks and bonds, municipal bonds, mutual funds, variable annuities, options, direct participation program partnerships, collateralized mortgage obligations, and more. The benefit of the Series 7 license is that it permits you to sell several types of securities products, except commodities and futures. 

The Series 7 license is good for the entire period that you work for a FINRA-member firm or self-regulatory organization (SRO). It only expires if you are terminated or leave a firm and do not find employment within two years at another FINRA-member firm or SRO. You do have to maintain it with continuing education, however. FINRA explains this in an article about firm and regulatory requirements.

Thinking about a career in securities? Download our free eBook, Launching Your Securities Career, to get tips and advice from 100+ securities professionals.

What is the difference between the Series 6 and Series 7 license?

If you hold a Series 6 license, you’re called a limited representative, and you can only sell mutual funds, variable annuities, and insurance premiums. For example, if a CPA wants to offer annuities and retirement planning services to clients, the CPA may only have to take the Series 6 exam. You’re a lot more restricted to what you can sell with a Series 6 license as opposed to a Series 7 license, which permits you to sell many more types of securities. Both serve specific needs and are appropriate for financial professionals who want to offer certain capabilities to their clients.

What jobs can I get with a Series 7 license?

Those who get this license are officially listed as registered representatives by FINRA but are more commonly referred to as stockbrokers. The majority of jobs will be with brokerages, investment firms, and banks. If you’re planning to focus on employment in the financial services industry after graduating from college, the Series 7 license is what banks and brokerages prefer.

How do I earn a Series 7 license?

Earning a Series 7 license involves four key steps:

  1. Take and pass the SIE exam.
  2. Secure a sponsorship from a FINRA-member firm.
  3. Register for the Series 7 exam.
  4. Study for and pass the Series 7 top-off exam.

Start your Securities career with confidence. Download our free eBook Launching Your Securities Career.

What is the Series 7 top-off exam? Why should I take it?

As part of implementing the Securities Industry Essentials (SIE) exam, FINRA restructured their examination programs. As part of this restructuring, FINRA has created a tailored top-off examination for earning the Series 7 license. 

You should take the Series 7 top-off exam if you want to be licensed to sell a broad range of securities in a brokerage or bank.

What are the requirements to sit for the Series 7 exam? Do I need a sponsor?

To take the Series 7 exam, you need a FINRA-member firm or SRO to sponsor you. After you’ve worked for them for four months or more, they can file a Form U4 (Uniform Application for Securities Industry Registration), which registers you for the exam. Fortunately, most firms that hire or train you will have a mandatory Series 7 licensing program included in their training package. 

There are no education requirements to sit for the Series 7 exam, although most candidates have a college degree in a finance-related field, and many choose to complete a Series 7 exam prep package prior to sitting for the exam.

May I take the Series 7 exam before the SIE exam?

Yes, although the more natural progression is to take the SIE exam first, mainly because you don’t have to be sponsored to take it. The SIE and Series 7 top-off exams are “co-requisites,” which means you can take and pass them in any order. Of course, you have to pass both to earn your Series 7 license.

Do I need to take the Series 7 top-off exam if I already have a different securities license?

If you’d like to be a stockbroker who sells virtually any type of securities, the answer is yes. Basically, the Series 7 license is what you need to sell everything except commodities futures, real estate, and life insurance.

Is the Series 7 exam paper or computer-based?

Like all other securities qualification exams, the Series 7 exam is administered by computer at a Prometric testing center.

What topics are covered on the exam?

The Series 7 exam topics include Investment risk, taxation, equity and debt instruments, packaged securities, options, retirement plans, and interactions with clients. The focus of the exam is the nature of these securities and financial instruments, and it tests knowledge relevant to the day-to-day activities, responsibilities, and job functions of general securities representatives.

How many questions are on the exam?

The exam consists of 125 multiple-choice questions, and each question has four answer choices. There are also ten additional unidentified and unscored pretest questions that do not contribute to your score that are randomly distributed throughout the exam. 

Sections% of Exam# of Exam Questions
1 - Seeks Business for the Broker Dealer from Customers and Potential Customers7%9
2 - Opens Accounts after Obtaining and Evaluating Customers' Financial Profile and Investment Objectives9%11
3 - Provides Customers with Information About Investments, Makes Suitable Recommendations, Transfers Assets and Maintains Appropriate Records73%91
4 - Obtains and Verifies Customers’ Purchase and Sales Instructions and Agreements; Processes, Completes and Confirms Transactions11%14
Total100%125

 

How much time does it take to study for the Series 7 top-off?

Most candidates spend 80–100 hours studying for the FINRA Series 7 exam if they have a finance background and about 150 if they don’t.

How hard is the Series 7 exam?

The Series 7 top-off exam expects candidates to be able to apply their knowledge of securities concepts to specific scenarios. The questions are detailed and related to the day-to-day activities, responsibilities, and job functions of representatives. Therefore, candidates should expect it to be challenging.

How much does it cost to sit for the exam?

The exam cost is $245.

What are the pass rates and passing scores for the exam?

The passing score for the exam is 72%. Because the Series 7 top-off exam just went live in October 2018, a pass rate has not been announced.

If I fail the Series 7 exam, what is the wait time before I can retake it?

Candidates who do not pass the top-off exam must wait 30 days before taking it again. However, if you fail it three times in succession, you must wait 180 days.

Ready to earn your Series 7 license?

We hope this article answers all of your questions about the Series 7 top-off exam and license. If you’re interested in taking the exam, we have Series 7 exam preparation packages. Or if you’re just getting started, check out our SIE exam prep and our SIE and Series 7 combo series.

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Posted by Kaplan Financial Education - April 9, 2019
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Frequently Asked Questions About the FINRA Series 6 Exam

So, you're planning to earn your Series 6 license? The questions most frequently asked about the Series 6 top-off exam and license are answered in this article, equipping you with the information you need to plan for this next step in your career.

What is the Series 6 License?

The Series 6 license (also known as the Investment Company/Variable Contracts Products license) enables you to register as a company's representative and sell mutual funds, variable annuities, and insurance.

Administered by FINRA, the Series 6 license is good for the entire period that you work for a FINRA-member firm or self-regulatory organization (SRO). It only expires if you are terminated or leave a firm and do not find employment within two years at another FINRA-member firm or SRO. You do have to maintain it with continuing education, however. FINRA explains this in an article about firm and regulatory requirements.

Thinking about a career in securities? Download our free eBook, Launching Your Securities Career, to get tips and advice from 100+ securities professionals.

What is the difference between the Series 6 and Series 7 license?

If you hold a Series 6 license, you’re called a limited representative, and you can sell mutual funds, variable annuities, and variable insurance policies. By contrast, the Series 7 license enables you to sell corporate stocks and bonds, municipal bonds, mutual funds, options, direct participation program partnerships, collateralized mortgage obligations, and more. A Series 6 license is more restrictive in terms of what you can sell compared to a Series 7 license, which permits you to sell most securities except commodities futures, real estate, and life insurance. Both serve specific needs and are appropriate to financial professionals who want to offer certain capabilities to their clients.

What jobs can I get with a Series 6 license?

If you’re interested in providing investment advice, retirement-planning services, and other types of financial guidance to clients. or you want a career in insurance or mutual fund sales, this is a good license to have. Officially listed as Investment Company Products/Variable Contracts Limited Representatives by FINRA, Series 6 license holders are usually financial advisers or insurance agents who also sell mutual funds; they work in brokerages, investment firms, banks, and insurance companies. In fact, you need to be employed by a sponsoring FINRA-member firm before you can sit for the Series 6 exam.

How do I earn a Series 6 license?

Earning a Series 6 license involves four key steps:

  1. Take and pass the SIE exam.
  2. Secure a sponsorship from a FINRA-member firm.
  3. Register for the Series 6 exam.
  4. Study for and pass the Series 6 top-off exam.

Start your Securities career with confidence. Download our free eBook Launching Your Securities Career.

What is the Series 6 top-off exam? Why should I take it?

As part of implementing the Securities Industry Essentials (SIE) exam, FINRA restructured their examination programs. FINRA is the governing body that ensures that anyone who sells securities products is qualified and tested. As part of this restructuring, FINRA created a tailored top-off examination for earning the Series 6 license.

You should take the Series 6 top-off exam if you want to be licensed to sell mutual funds, variable annuities, and insurance.

What are the requirements to sit for the Series 6 exam? Do I need a sponsor?

To take the Series 6 exam, you need a FINRA-member firm or SRO to sponsor you. The firm files a Form U4 (Uniform Application for Securities Industry Registration), which registers you for the exam. Fortunately, most firms that hire or train you will have a mandatory Series 6 licensing program included in their training package.

There are no education requirements to sit for the Series 6 exam, although most candidates have a college degree in a finance-related field, and many choose to complete a Series 6 exam prep package prior to sitting for the exam.

May I take the Series 6 exam before the SIE exam?

Yes, although the more natural progression is to take the SIE exam first, mainly because you don’t have to be sponsored to take it, and it is a more general exam that covers securities concepts. The SIE exam and Series 6 top-off exams are “co-requisites,” which means you can take and pass them in any order. Of course, you have to pass both to earn your Series 6 license.

Do I need to take the Series 6 top-off exam if I already have a different securities license?

It depends on the license. You might not need the Series 6 if you have a Series 7 license and you don’t plan to sell life insurance. If you have a Series 3 license and decide to stop selling commodity futures in favor of mutual funds, you’ll need to earn the Series 6. You should consult with your firm before deciding whether you need a license or not.

Is the Series 6 exam paper or computer-based?

Like all other securities qualification exams, the Series 6 exam is administered by computer at a Prometric testing center.

What topics are covered on the Series 6 exam?

The Series 6 exam topics include mutual funds, variable annuities, securities and tax regulations, retirement plans, and insurance products. The focus of the exam is the day-to-day activities, responsibilities, and job functions related to selling and purchasing these products.

How many questions are on the Series 6 exam?

The exam consists of 50 multiple-choice questions, and each question has four answer choices. There are also five additional unidentified and unscored pretest questions that do not contribute to your score that are randomly distributed throughout the exam.


Sections
% of Exam# of Exam Questions
1 - Seeks business for the broker-dealer from customers and potential customers24%12
2 - Opens accounts after obtaining and evaluating customers’ financial profile and investment objectives16%8
3 - Provides customers with information about investments, makes suitable recommendations, transfers assets, and maintains appropriate records50%25
4 - Obtains and verifies customers’ purchase and sales instructions; processes, completes, and confirms transactions10%5
Total100%50

 

How much time does it take to study for the Series 6 top-off?

Most candidates spend 40 to 60 hours studying for the FINRA Series 6 exam.

How hard is the Series 6 exam?

The Series 6 top-off exam expects candidates to be able to apply their knowledge to specific scenarios. The questions are detailed and related to the day-to-day activities, responsibilities, and job functions of limited representatives. Therefore, candidates should expect it to be challenging but quite passable with dedicated and focused preparation.

How much does it cost to sit for the Series 6 exam?

The exam cost is $40.

What are the pass rates and passing scores for the Series 6 exam?

The passing score for the exam is 70%. Because the Series 6 top-off exam just went live in October 2018, a pass rate has not been announced. However, in our most recent customer surveys, 90% of respondents have reported passing the Series 6 exam after using Kaplan prep materials.

If I fail the Series 6 exam, what is the wait time before I can retake it?

Candidates who do not pass the top-off exam must wait 30 days before taking it again. However, if you fail it three times in succession, you must wait 180 days. Your firm will also have to sponsor you again for each retake, and you will also have to pay the full fee each time.

Ready to earn your Series 6 license?

We hope this article answers your pressing questions about the Series 6 top-off exam and license. If you’re interested in taking the exam, we have Series 6 exam preparation packages. Or if you’re just getting started, check out our SIE package and our SIE and Series 6 combo series.

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Posted by Kaplan Financial Education - April 9, 2019
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Frequently Encountered SIE Exam Roadblocks and Solutions

FINRA launched the Securities Industry Essentials (SIE) examination late last year. The regulator’s intent was to position the SIE exam as an introduction to the securities industry. The exam is designed to assess a candidate’s knowledge of the fundamentals of the securities industry. Test content focuses on products and their risks, the process of raising capital, the structure of securities markets, and the role of various regulatory agencies.

By design, the intent of the SIE exam is to focus on the basics. Why just the basics? Remember, passing the SIE exam alone does not qualify an individual for registration with a FINRA member firm. To become registered, successful SIE candidates need to gain sponsorship with a member firm and then pass one or more “top-off” exams. These top-off exams are narrower in focus and cover specific products and their regulation in far greater depth. Additionally, the top-off exams assume the candidate understands the basics of a given product and are designed to be more focused on suitability issues.

In 2018 alone, Kaplan had more than 18,000 students purchase SIE exam prep materials. Enough of those students have now sat for the exam that we can learn more about the most common challenges they’ve encountered. In this article, we will examine some of those challenges and offer some helpful tips on how to remedy them.

Roadblock #1: Specialized language and acronyms

The SIE exam is, above all else, a reading comprehension exercise. There are very few math computations on the test. Exam writers expect students to be comfortable with the specialized language of finance, as well as common acronyms. Students are strongly encouraged to review the glossary found in the back of the Kaplan License Exam Manual (LEM). The glossary is a great first step in demystifying some of the industry-specific language students may encounter on their exams.

We also strongly recommend students complete the 75-question SIE Practice Test provided by FINRA. Spending the time to review the practice test will pay dividends by exposing SIE exam candidates to a test created by the same writers who author the real exam. Remember, FINRA exams are written by committee and, unlike other standardized tests such as the SAT, the language and sentence structure may vary between individual questions. Some questions may contain legal jargon contained within various FINRA rules, while others may employ more of a conversational tone. The point of taking FINRA’s SIE Practice Test is to gain exposure to several different writing styles and “spins” on topics prior to taking your actual test.

Roadblock #2: One word may have several meanings

If you’ve spent some time with the SIE exam prep you’ll notice some words have multiple meanings. For example the word principal could refer to:

A) a bond’s face value,

B) a person in a managerial position at a brokerage firm, or

C) the capacity of a firm on a given trade.

Students may encounter this “one word has several meanings” quandary on the SIE exam as well. For example, exam writers could use the word covered in several different contexts:

1) Covered is a situation in which the writer of an option has the underlying deliverable. For example:

  • A call writer is covered by already owning a long stock position. (The long position nets against the call writer’s obligation to sell.)
  • A put writer is covered by a short stock position. (The short position nets against the put writer’s obligation to buy.)

2) The word covered may also be used as slang to mean a protected or hedged position. This is not strict financial terminology but more akin to, “Don’t worry, I’ve got this position covered.”

In this case, a put option covers or protects a long position since the put locks in a minimum sales price on a potential closing out (sale) of the client’s long position. A call option covers or protects a short position since the call locks in a maximum purchase price on a potential closing out (buying back) of the client’s short position.

3) The third use of the term covered involves the closing out an options position. Remember, buyers create their initial position with an opening purchase, while writers create their initial position with an opening sale. In this context:

  • a closing sale covers (or closes out) a buyer’s existing open long option position, and
  • a closing purchase covers (or closes out) a writer’s existing open short option position.

Planning to sit for the SIE Exam? Download a FREE copy of the Candidate's Complete Guide to the SIE Exam. 

Roadblock #3: Multiple terms used to reference the same concept

As noted in Kaplan’s LEM, the terms options writers, options sellers, and going short a contract and option could all be used to express the same concept. Conversely options owners, options buyers, and going long a contract reference the same ideas. Remember, the SIE exam is written by committee, and the writers may employ their own favored terminology.

Roadblock #4: Math? (Not much, but some)

Remember, the SIE exam focuses on reading comprehension. Students can expect very few calculations on their exam. Many students report only seeing one or two calculation items. Here are the three formulas that are the most likely to be tested:

  • % Sales Charge (load) for a Mutual Fund Purchase = (POP – NAV)/POP
  • Current Yield = Annual Interest Payment/Bond Price
  • Dividend Yield = Annual Dividend*/Stock Price

*Note: Remember to multiply the quarterly dividend provided in the question by 4.

Roadblock #5: Expansion of definitions into concepts

Students can expect that approximately 25% of their exam questions will move beyond mere definitions and tie together various concepts from different sections of Kaplan’s LEM and/or address suitability issues with a given product. In these tough questions, students are expected to extend their factual knowledge of a product or rule into a conceptual understanding. Here are a few examples of these more challenging questions:

Example #1: The Influence of FRB Policy

We spend some time in the LEM going through the FRB tools and detail the concepts of FRB tightening (raising rates) and loosening (lowering rates). The exam could employ slang terminology in this area. Tightening becomes the FRB being hawkish, and loosening is referenced as the FRB being dovish.

If the FRB is hawkish, investors should shorten their maturities. Why?

Exam takers must tie together three facts to get to the right answer.

1) Hawkish means rising rates.

2) Rising rates translates into lower future bond prices based on the inverse relationship between yield and price.

3) Short term bonds will be hurt less by rising rates due to their lesser relative price volatility when compared to long term issues. Remember, maturity magnifies the price move.

Dovish is the opposite expectation and implies potentially lower future interest rates and higher future bond prices. If this is the expectation, bond investors should lengthen maturities to take advantage of the anticipated upward positive price movement in bonds.

Example #2: Selecting the Correct Bond

A second example of the extension beyond definitions could be the exam writer providing a brief description of the client and then asking a question about the appropriate debt security recommendation. There will be hints in the question such as the person’s age, job, income, risk tolerance, investment horizon, and so on. To get these questions correct, you need to have a firm grasp of the relative safety profile and tax status of each debt instrument.

For example, high earners should be steered toward municipals because of the tax-free status of these issues’ coupons. Safety seekers should consider treasuries due to these issues’ default-free status. While middle-of-the-road investors (middle-aged, average incomes) might be best served with an investment in a high grade corporate bond issue. If you encounter an investor who appears to want equity exposure as well, go with the convertible corporate bond since this will provide indirect appreciation potential. If the question leads with a client’s near-immediate need for funds, pick the shortest maturity conservative investment.

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Posted by Kaplan Financial Education - April 9, 2019
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9 Helpful Tips for Taking the SIE Exam

As you prepare to sit for FINRA’s Securities Industry Essentials (SIE) exam, you may be wondering what the experience will be like on exam day. Oftentimes, candidates get anxious prior to an important exam just from the anticipation of the unknown. But there are things you can do prior to the exam to reasonably control your nerves and put your best foot forward when you sit to take the exam.

If you’ve completed an SIE exam prep program, you’ve already solidified your knowledge. Now take your exam prep across the finish line by applying these nine crucial tips on SIE exam day.

Tip #1: Read the Full Question

Confidence is an important tool in your test-taking arsenal. But misplaced confidence can also cause problems when you’re sitting for the SIE exam if you’re not careful. Questions are often written to trap people who assume too much. The question may not be asking what you think it is if you don’t read it in its entirety. Read each question completely before choosing your answer.

Tip #2: Watch for Hedge Clauses

A hedge clause is a term like if, not, all, none, or except. In the case of if statements, the question can be answered correctly only by taking the qualifier into account. Be on the lookout for these words, and make sure you fully consider how they affect what’s actually being asked.

Tip #3: Look for Keywords and Phrases

Certain words provide clues to the situation being presented. For example, the word prospectus gives you a clue that the question is about a new issue.

Tip #4: Interpret the Unfamiliar Questions

It’s likely that you will come across some questions on the SIE exam that seem unfamiliar at first glance. Don’t let it throw you off. Sometimes questions present information indirectly, making something you’re quite familiar with seem unfamiliar. It can be helpful to interpret the meaning of certain elements before you can answer the question. To thoroughly test your grasp of the knowledge, expect the exam to test concepts from multiple angles.

Taking the SIE exam? Download the free eBook, A Candidate's Complete Guide to the SIE Exam, for valuable information about the test contents and the securities licensing process.

Tip #5: Use Information from Prior Questions

This is something test takers don’t always think about in the moment. But be attentive to it. Some questions need to provide you with information to set a scene and give you what you need to answer the question being asked. That information may prove valuable, providing clues to an answer on another question later in the exam. 

Tip #6: Define What is Being Asked

Questions sometimes provide too much information, and not all of it is relevant. Learn to separate the story from the question to get to the heart of what’s really being asked. This is something you can practice before the exam so you’re prepared for it when you face it.

Tip #7: Use a Calculator

Most of the questions that require calculations on the SIE exam are written so the math involved is simple in nature and function. But in a potentially high-stress situation, you are more prone to making mistakes. Use a calculator to ensure that common math errors don’t lead to incorrect answers.

Tip #8: Beware of Changing Answers

If you are not completely sure of an answer, you should trust your first hunch. Only change answers when you discover you didn’t read the question correctly, or you find additional helpful information in another question.

Tip #9: Pace Yourself

Keep an eye on the time remaining, which will be displayed on your computer screen. Be aware of the time you have left to complete the exam and the number of questions you have remaining. Don’t panic, but pace yourself appropriately to ensure you’re not scrambling in the end. A common way test takers maintain a pace is answering the questions they know instantly first, and then coming back to the more difficult questions later.

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Posted by Kaplan Financial Education - April 9, 2019
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FINRA Proposes Big Changes to Securities Continuing Education

New Rules Proposed for both Firm Element and Reg Element CE

Nothing is certain but change! Securities Industry Continuing Education (CE) programs may soon undergo significant changes if new proposals are adopted. The new ideas are now in the “testing the waters” stage and have been floated out to firms at the 2018 FINRA Conference and via new FINRA press-release and Reg. Notice. “What does this mean to me?” you ask. If you’re involved in CE program oversight, compliance, or simply a “covered person” required to complete CE, you should to read on and learn more. Change can be disruptive but may also come with some benefits for you and your firm.

CE Definitions and Historical Context

Firm Element CE (FE) is training delivered to the firm’s “covered persons” (primarily those who meet with the investing public or their direct supervisors). Firm element courses/content—“in house” or via third-party education providers—are determined after conducting a "needs analysis" that is specific to each firm and addresses the nature of business conducted and any pertinent issues affecting the firm or its registrants. The FE needs analysis must also consider the results of its registrants’ recent Reg Element CE completions (i.e., where were they deficient?). Once the needs analysis is done, a firm "training plan" is created. FE is done annually and firms must document, and be prepared to defend, their FE training program. 

Regulatory Element CE (Reg Element) is prescriptive training (i.e., determined by FINRA and NOT by the frim) and is based upon individuals’ registration type (e.g., different content for Supervisors vs RRs):

Reg Element training cycles (registrant’s exam window opens) begin at the second-year anniversary from initial registration and every three years thereafter. Reg Element is delivered online via FINRA’s Online CE System, and curriculum generally consists of important rules and regs, compliance, ethical and supervisory subjects, and sales practice standards. Reg Element must also be completed within prescribed time-frames.

Abbreviated History of Securities Industry Continuing Education (CE)

In concert with the self-regulatory organizations (SROs*), the rules for continuing education were developed by The Securities Industry/Regulatory Council on Continuing Education—or more simply the “CE Council” (CEC)—and approved by the Securities and Exchange Commission (SEC) on February 8, 1995. Firm Element and Regulatory Element (Reg Element) went into effect in July of 1995. Several key Reg Element rule changes were implemented over the years, yet Firm Element (FE) has remained largely untouched.

In 2015, with approval of amendments to FINRA Rule 1250 (Continuing Education Requirements), the “new era” for CE began. Specifically, the CE Online Program was rolled out. As a result, online Reg Element CE fees were reduced to $55 per participant, compared to the physical (onsite) test center delivery charge of $100. Another important change was the elimination of “In-Firm Delivery” of the Reg Element. In-Firm Delivery (via supervised sites set up at firms) was phased out effective January 4, 2016. All Reg Element Programs are now available and must be completed through FINRA's CE Online System.FINRA’s new system allows participants to “satisfy their CE Regulatory Element requirement from a home or office computer—anytime, anywhere.” 

The New FINRA/CEC Proposals for Reg Element and Firm Element

If implemented, the new (Sept 2018) FINRA/CEC proposals will have wide impact on firms and their “covered persons”—those who must participate in both Reg Element and Firm Element CE. The new proposals are outlined in  FINRA’s Sept 6, 2018 News Release and in more detail through FINRA’s Sept 8 Reg Notice 18-26.

What are the primary “CE Program” changes under consideration? FINRA and CEC are now soliciting feedback from member firms around the notion that Firm Element (FE) can more effectively be provided through a single platform, where content standards are more uniform, redundancies can be minimized, and delivery methodology can be more efficiently tracked and maintained. Specifically, FINRA/CEC are suggesting that all FE content should be delivered via FINRA's Online CE System and supported via email notifications through the Financial Professional Gateway (FINPRO). If these changes are implemented, this would remove both ‘in house’ (member firms) and third-party CE vendors from the CE delivery and in some instances 'tracking' business, albeit FINRA is making it clear that they will continue to 'consider' (presumably there will be a vetting process) and utilize course content from firms and education providers, as long has the content can be formatted for delivery through FINRA’s system. Moreover, FINRA has proposed one (1) course catalogue where all member firms can choose content which meets/matches their training plan along with FINRA’s new “to be defined” minimum standards; “FINRA and the CE Council would work together with third-party training providers to offer a large catalog of readily available materials that are centrally located for convenience.

FINRA and CEC are also touting the Financial Professional Gateway (FINPRO) e-notification and reporting capability; The FINRA CE delivery platform provides the most efficient and effective means of tracking their compliance with the proposed CE requirements.

FINRA/CEC arguments in favor of the proposed ‘FE move’ to FINRA Online CE System:

  • Greater consistency in content and presenting material in an optimal learning format.
  • Reduction in redundant content (i.e., not repeating topics covered during Reg Element or other credentialing programs); The CE Council is considering creating a centralized content catalog to serve as an additional source of Firm Element content.
  • Automated email notifications to “covered” registered persons and course completion reporting to firms and individual registrants; FINRA has also released a system to improve access to data and delivery of services to registered representatives, although the system is not yet widely used. This system, the Financial Professional Gateway (FINPRO).
  • Ensuring adequate CE training is delivered (they are considering“defined minimum standards”)—FINRA has observed that FE training plans vary widely (firm-by-firm), and some firms ‘over train,’ yet other firms “provide very limited amounts of Firm Element, and the CE Council is concerned that registered representatives at those firms may not be receiving adequate training."
  • Ability to offer “FE credit” to forms of training not recognized in Firm Element programs today (e.g., offering FE credit to those who recently completed industry credentialing programs—CFP®, CFA®, etc.).
  • Assisting those who’ve left the industry—more than 2 years out—by allowing them to reenter (“re-qualify”) by way of completing a TBD curriculum (consisting of both FE and Reg Element content), without having to take a new qualification exam. FINRA is making the argument that this re-qualification process is problematic unless uniformity and consistency are maintained (which can be accomplished via FINRA’s Online CE Program); The central idea is to allow previously registered individuals to complete an annual Regulatory Element as well as additional content equivalent to Firm Element while out of the securities industry.” However…Without establishing an industry Firm Element baseline expectation, it is difficult to determine the appropriate expectation for individuals who are maintaining their qualification outside the industry.

 While most of the bullet points above pertain to FE, there is one new notion affecting Reg Element. SICE/FINRA are proposing a move to annual Reg Element CE training versus the current 3-year cycle, and this makes elimination of redundant FE content all the more important from FINRA’s perspective, and no doubt an idea that firms and covered persons will also appreciate.

Timeframe

New regulations are rarely instantaneous and CE rule changes will be no exception. The CE Council is presently gathering additional info on current firm practices and needs. FINRA and the CEC are also soliciting feedback (comment period expired Nov. 8, 2018) and will continue to formulate their ideas before delivery of a formal rule proposal. Given that late time of year (Oct. 2018 as of this article’s publication date) it is unlikely any formal rule will be drafted before year-end. It is more probable that CEC and FINRA will have a new proposal coming in the first or second quarter of 2019 followed by a comment period. Bottomline -- new CE rules will likely NOT be finalized until 2020 or 2021. Yet as the saying goes, "time flies."

Footnotes:

*In May 1993, six SROs—the New York Stock Exchange, American Stock Exchange, Chicago Board Options Exchange, Municipal Securities Rulemaking Board, NASD, and Philadelphia Stock Exchange—created the Securities Industry Task Force on Continuing Education to study the issue of continuing education and to develop recommendations.

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Posted by Dan Butterfield, Solutions Engineer at SmartPros - April 9, 2019
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Financial Advisor vs. Investment Adviser: What’s In a Name?

In a line made famous by Juliet in the William Shakespeare play, Romeo and Juliet, she says "A rose by any other name would smell as sweet." The phrase is commonly used today to suggest that the name given to something does not necessarily describe its meaning. In the case of a rose, there is a specific definition relating to a thorny bush coming from the Latin word, Rosa. So, call it a rock, call it a car, or call it whatever you want. It is still a rose. 

What if a securities professional uses the term financial advisor? What does that mean to you? Unfortunately, unlike the rose, there is no legal definition for that term, and, to quote Mr. Shakespeare again (this time from Hamlet), “Aye, that’s the rub.” Because anyone can call himself a financial advisor, confusion reigns in the financial industry, and the SEC has finally taken steps to attempt to address that issue.

Thinking about a career in securities? Download our free eBook, Launching Your Securities Career, to get tips and advice from 100+ securities professionals.

Similar to the rose, there is a legal term, investment adviser, found in the federal Investment Advisers Act of 1940 and the state law, the Uniform Securities Act. These persons are held to a fiduciary standard and are defined as an investment adviser by meeting a 3-prong test:

  1. The person gives advice on securities
  2. The advice is given as part of a regular business
  3. The person receives compensation for the advice

Furthermore, under both federal and state law, excluded from the definition of an investment adviser are broker-dealers if their performance of advisory services is solely incidental to the conduct of their business as a broker-dealer, and they do not receive any special compensation for their advisory services. But, what happens when broker-dealers and their salespersons call themselves financial advisors?

Historically, the stock brokerage industry has used many terms to describe those individuals who are involved in securities sales for broker-dealers. Legally, the term is registered representative (or agent under state law), but the most common term was stockbroker. Euphemisms abound because firms wanted their salespersons to sound like something other than a stock pusher. In the November 19, 1927, issue of The New Yorker magazine, the term customer’s man was used (there were few if any women registered at that time). Later on, they became account executives and, most recently, financial advisors.

In 2006, the Securities and Exchange Commission (SEC) commissioned The RAND Corporation, a major think tank, to conduct a study focused on two questions:

  • What are the current business practices of broker-dealers and investment advisers?
  • Do investors understand the differences between broker-dealers and investment advisers?

As RAND reported, “The study confirmed that the industry is becoming increasingly complex, firms are becoming more heterogeneous and intertwined, and investors do not have a clear understanding of the different functions and fiduciary responsibilities of financial professionals.”

Of significant importance were the responses to the second question. About two-thirds of the respondents were classified as “experienced” investors, meaning that they had investments outside of retirement plans and/or formal training in finance or investments. Yet, even with that background, when presented with a list of services and obligations and then being asked to indicate which items applied to investment advisers, brokers, and financial advisors, their responses showed that financial advisors were viewed more similarly to investment advisers than brokers.

They attributed part of their confusion to the dozens of titles used in the field, including generic titles, such as financial advisor and financial consultant. Another study, “the 913 study,” was mandated by Section 913 of the Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank), and the findings echoed those of the RAND study. Specifically, “Many retail investors and investor advocates submitted comments stating that retail investors do not understand the differences between investment advisers and broker-dealers or the standards of care applicable to broker-dealers and investment advisers. Many find the standards of care confusing, and are uncertain about the meaning of the various titles and designations used by investment advisers and broker-dealers.”

Finally, in April 2018, the SEC released a proposal to limit the use of the terms advisor and adviser. The proposal stated:

We agree that it is important to ensure that retail investors receive the information they need to understand the services, fees, conflicts, and disciplinary history of firms and financial professionals they are considering. Likewise, we believe that we should reduce the risk that retail investors could be confused or misled about the financial services they will receive as a result of the titles that firms and financial professionals use, and mitigate potential harm to investors as a result of that confusion. We are proposing rules that would (i) restrict the use of the terms ‘adviser’ and ‘advisor’ by broker-dealers and their associated financial professionals, and (ii) require broker-dealers and investment advisers to disclose in retail investor communications the firm’s registration status while also requiring their associated financial professionals to disclose their association with such firm. Specifically, we believe that certain names or titles used by broker-dealers, including ‘financial advisor,’ contribute to retail investor confusion about the distinction among different firms and investment professionals, and thus could mislead retail investors into believing that they are engaging with an investment adviser–and are receiving services commonly provided by an investment adviser and subject to an adviser’s fiduciary duty, which applies to the retail investors’ entire relationship–when they are not.

The proposal would restrict any broker-dealer and any individual associated with the broker-dealer from using, as part of its name or title, the words adviser or advisor unless the broker-dealer is registered as an investment adviser under the Advisers Act or with a state, or any individual who is an associated person of such broker or dealer is properly registered as an investment adviser representative.The effect of the proposal would restrict the ability of a broker-dealer (unless also registered as an investment adviser) to use the term adviser or advisor in any manner such as financial advisor/adviser, wealth advisor/adviser, trusted advisor/adviser, and advisory (e.g., “XYZ Firm Advisory”) when communicating with any retail investor.

What final form the rule will take is not clear, but what is clear is that, at least for broker-dealers and their reps, you won’t be able to call yourself a rose if you are not one.

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Posted by Chuck Lowenstein, Senior Securities Editor - April 9, 2019
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What is the SIE Exam?

The SIE Exam is a required qualifications exam administered by FINRA. It tests basic information including products, risks, the structure & function of the securities industry & its regulatory agencies, and knowledge of regulated & prohibited practices.

Why FINRA Introduced the SIE Exam

FINRA developed the SIE exam for two primary reasons. First of all, the organization recognized that across many of their series-specific exams, there were questions covering the same introductory topics. As a result, candidates who sat for multiple securities exams throughout their career were being tested on the same material multiple times. These topics have been pulled out of those series-specific exams, and will now be tested in the SIE exam. We’ve detailed which exams will be changing and how in our SIE FAQ article

The second reason FINRA created the SIE exam was to remove a significant barrier to entry into the industry. Previously, in order to sit for any of FIRNA’s series-specific exams, an individual would need to be sponsored by an employing brokerage. While this is still the case, individuals can sit for the SIE exam before securing employment. This significantly opens the industry up to career changers and university students.

Download the free eBook, A Candidate's Complete Guide to the SIE Exam, for more valuable information about the test contents and the securities licensing process.

SIE Exam Format

The SIE exam is a 75-question, multiple-choice exam. It consists of four parts FINRA calls Functions that each carry a different weight in a candidate's score. The Functions and their respective exam weight are: 

Function 1: Knowledge of Capital Markets12 of 75 questions16% of the test
Function 2: Understanding Financial Products and their Risks33 of 75 questions44% of the test
Function 3: Understanding Trading, Customer Accounts, and Prohibited Activities23 of 75 questions31% of the test
Function 4: Overview of Regulatory Framework7 of 75 questions9% of the test

 

All candidate test scores are placed on a common scale using a statistical adjustment process known as “equating”. Equating accounts for the slight variations in difficulty that may exist among the different sets of exam items (questions) that candidates receive. This allows for a fair comparison of scores and ensures that every candidate is held to the same passing standard, regardless of which set of questions they received.

History of the SIE Exam

At the 2015 ARM educational conference, FINRA first introduced a proposal to amend how candidates qualify to be registered at the representative level in the securities industry. Since that initial announcement, FINRA has routinely provided updates introducing additional details about the SIE exam. In October 2017, FINRA announced October 1, 2018, as the effective date for the SIE exam.

If you already hold a securities license, you are exempt from taking the SIE exam. But any individual seeking to earn their first securities license, whose testing window opens after October 1, 2018, will be required to pass the SIE exam prior to earning a representative-level qualification exam for a specific series.

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Posted by Kaplan Financial Education - April 9, 2019
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How to Become a Registered Representative

Registered representatives, also known as brokers, represent clients in the trade of investment products such as stocks, bonds, and mutual funds. The “registered” part of the title refers to the fact that the sponsoring firm and the individual are licensed with the Financial Industry Regulatory Authority (FINRA). Individuals cannot be registered representatives if they and their firm are not licensed.

How to Become a Registered Representative 

Step 1: Sit for and Pass the SIE Exam

In 2018, FINRA initiated a new introductory step in the process of earning a securities license and becoming a registered representative in the form of a new exam called the Securities Industry Essentials (SIE) exam. If you are seeking a securities license with an exam window that opens after October 1, 2018, you will be required to pass the SIE exam plus the qualification (series-specific) exam required for the type of business you plan to engage in.

Many people have questions about the new SIE exam, and here are a couple big things to know. First, the SIE exam tests on a number of topics formerly tested on multiple series-specific exams. Second, you do not need to have a sponsoring broker to sit for the SIE exam. With this move, FINRA is reducing duplicative testing of general knowledge and making it easier for individuals to begin the process of becoming a registered representative.

Thinking about a career in securities? Download our free eBook, Launching Your Securities Career, to get tips and advice from 100+ securities professionals.

Step 2: Secure Sponsorship with a Licensed Firm

Once you’ve passed the SIE exam, your firm must file a Uniform Application for Securities Industry Registration or Transfer. The form is often referred to as Form U4. This form collects administrative and disclosure information. It’s important that all of the information in your Form U4 is accurate and always up-to-date. Otherwise, FINRA can take regulatory action against you, your firm, or both.

Step 3: Choose an Exam that Fits What You Want to Do

Before registering for your first securities examination, you need to know the type of work you’ll be doing and the license that covers it. Your sponsoring broker will likely have a very specific exam in mind for you to begin with, based on the work you’ll be doing. Check out this article detailing the most common securities licenses and what each license qualifies holders to do.

Step 4: Register and Prepare for the Exam

Once you’ve decided on an exam, your sponsoring broker is required to file an application for you through FINRA’s CRD system. FINRA’s approval of that application opens a 120-day testing window. FINRA suggests you schedule your exam as far in advance as possible to ensure you get your desired date. There are a few things the scheduling center will need from you in order to schedule your exam:

  • Your name and CRD number (which you receive upon approval of your Form U4)
  • The test name or corresponding series number
  • Your or your employer’s phone number
  • An email address to confirm your appointment

Once you’ve scheduled your exam, it’s time to turn your attention toward studying and preparing for success. Look for an exam prep provider with a proven history of success preparing candidates for success with securities licensing exams. Many exam prep providers offer live, online, and self-study options for you to choose.

Step 5: Sit for and Pass a Series-Specific Qualification Exam

Finally, it’s time to put your hard work to the test on exam day. All of the test-taking tips you’ve practiced throughout your life are equally valid when it comes to preparing to be successful for a securities exam. Get plenty of sleep the night before. Make sure you eat a balanced breakfast the morning of the exam. Arrive early and approach the task at hand with confidence. You’ve done the preparation—now it’s time to pass the exam and earn your reward as a newly licensed registered representative.

How to Get Started

You now have the basic steps you need to complete to become a registered representative. For more information on starting your new career, check out FINRA’s Registered Representatives Brochure. You can also find more helpful articles in Kaplan’s Career Corner.

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Posted by Kaplan Financial Education - April 9, 2019
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MSRB Modifies the Series 52 Qualification Exam

The Municipal Securities Rulemaking Board (MSRB) filed a proposal with the SEC to modify the Series 52 exam into a specialized knowledge examination, while at the same time recognizing a passing score on FINRA’s Securities Industry Essentials (SIE) Examination as a prerequisite. This change was implemented on October 1, 2018.

Summary: General Knowledge Content Redundancy Removed

The Series 52 exam once had general knowledge content that is now tested by the SIE exam. The MSRB accepts FINRA’s new SIE exam and has restructured the Series 52 exam to eliminate duplicate testing of general securities knowledge. The exam is now a more tailored, specialized knowledge exam.

MSRB, Series 6, and Series 7

The MSRB continues to recognize, even revised, the General Securities Representative Qualification Examination (Series 7) for qualification as a “municipal securities sales limited representative,” and the Investment Company and Variable Contracts Products Representative Examination (Series 6) for qualification as an “investment company/variable contracts limited representative to further regulatory consistency.”

There is no impact to the Series 53 exam.

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Posted by William James, Senior Content Specialist - April 9, 2019
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7 Strategies for Passing the Series 7 FINRA Qualifications Exam

To solicit, purchase, and sell all securities products (e.g., corporate securities, municipal fund securities, options, direct participation programs, investment company products, and variable contracts), you need a Series 7 license. To be eligible to earn that license, you need to have passed the Securities Industry Essentials (SIE) exam (either before or after the Series 7 exam) and secured sponsorship from a member firm or self-regulatory agency (SRO) that has also registered you with FINRA. If you’ve met these requirements, you can enroll with FINRA and schedule your exam with Prometric up to 120 days after you’ve been registered. 

With all that out of the way, you’re now ready to prepare for the exam. To ensure you have the best chance of passing the Series 7 FINRA qualifications exam, you need good strategies. Here are seven that can help you pass.

Thinking about a career in securities? Download our free eBook, Launching Your Securities Career, to get tips and advice from 100+ securities professionals.

Strategy 1: Make a Study Plan

You need to spend 80-100 hours studying for the FINRA Series 7 exam if you have a finance background and about 150 if you don’t. The first thing you should do is lay out a study plan that ensures you put those hours in. Give yourself enough time to take breaks from study to let concepts percolate. We strongly recommend including a Series 7 preparation package as part of your plan. Most web sources say the Series 7 pass rate is 65% (FINRA doesn’t release the pass rates), but in a recent Kaplan survey of Kaplan Series 7 students, 85% reported passing the Series 7 qualification exam.

Strategy 2: Set a Routine Early

Set your study routine as soon as possible. A steady, regular study method will increase your retention dramatically compared to frantic cramming at the end. Balance your studying between manuals and practice questions so you don’t burn out on either. Be sure to take a day off to rest your mind when you need to. And, speaking of routines, in the last weeks before the exam, try to get in a good sleep pattern. Anxiety can make sleeping difficult, but having a set sleep schedule some time before will keep you rested.

Strategy 3: Focus on Learning Concepts

The Series 7 exam consists of 125 multiple-choice questions and takes 225 minutes. It focuses on the nature of various securities and financial instruments such as equities, bonds, options, and municipal securities. Almost 75% percent of the questions relate to providing customers with investment information, making suitable recommendations, transferring assets, and maintaining appropriate records. If you’re tempted to focus only on memorizing formulas related to these topics, don’t. Instead, be sure to learn the concepts; they are more important than formulas. A number of the questions will test how you incorporate all your knowledge to make suitable recommendations for a hypothetical client.

Strategy 4: Use Practice Questions to Measure and Improve Comprehension

Because there are different types of questions on the exam, practice questions are your secret weapon for Series 7 exam success. Plan to invest a significant amount of time answering questions to get a better understanding of where your strong and weak points are, and where you need to focus more attention. If your exam prep provider provides a question bank database, take advantage of this valuable study asset as much as you can.

Strategy 5: Take Series 7 Practice Exams

One of the best ways to improve your chance of passing is to take practice exams. Practice exams are different from practice questions because they closely replicate the real exam in terms of degree of difficulty, weighting, and format. Most are updated to address the latest regulations, and you receive a score with diagnostic feedback. The better you perform on these exams, the greater your likelihood of passing the Series 7 exam.

Strategy 6: Stay Calm on Exam Day

Plan to arrive at the testing center more than 30 minutes beforehand. That gives you plenty of time to check in, find where you are supposed to go, and collect your thoughts before the exam starts. During the exam, take the questions one at a time. Everything you need to answer a question correctly is always right there, so you don’t have to second-guess yourself. Nor should you think about how many questions lie ahead—focus on the one at hand, answer it, and move on.

Strategy 7: Read the Whole Question

Our last strategy is one that’s often overlooked because it seems so obvious. But, interestingly, you’d be surprised at how many people don’t read the whole question. That’s because most of us are conditioned to skim through information to find the one little nugget we are looking for as we simultaneously worry about how much time we have. If you approach Series 7 exam questions this way, you are likely to miss something important. So, be sure to read the entire question and all the answer choices. Then read the last sentence of the question again before starting to eliminate answers. Here’s another valuable tip: if you have read the question thoroughly, and there are at least two answer choices you cannot eliminate, consider choosing “all of the above” if it’s an option.

You're Now 7 Steps Closer to Passing the Series 7 FINRA Exam

The Series 7 exam can be tough, but if you follow these strategies, study wisely, and invest in exam prep, you have a great chance of passing.

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Posted by Kaplan Financial Education - April 8, 2019
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POINT OF VIEW: SEC’s Best-Interest Rule Rises on the Bones of the DOL’s Fiduciary Rule

Disclaimer: William R. James is a Senior Editor at Kaplan Financial Education. The opinions expressed in this article are solely those of the author based on personal research and observations. They should not be viewed as legal advice.

Following a loss of two federal appeals court hearings and the passing of a deadline to seek a Supreme Court review, it is safe to say that the Department of Labor’s Fiduciary Rule is dead. The objective of the rule was to ensure that financial professionals (broker-dealers and registered representatives) put their customers’ financial interests ahead of their own when recommending retirement investments. President Trump ordered a review of the rule “to determine whether it may adversely affect the ability of Americans to gain access to retirement information and financial advice.”

 So where does that leave us? After laying out $5 billion to implement the DOL’s regulatory thrust, there’s much bewildered head-scratching in the financial services industry. What was that all about? In some ways, there’s a sense of relief that regulation is settling back to its customary regulatory provider by registered advisers and broker-dealers. But, Congress’s view of two separate authorities acting in different capacities was tamped down, leaving the whole matter in a legal mess.     

The DOL Stumbled

Congress looked explicitly to the DOL for regulatory protections of retirement plans rather than the SEC, reasoning that the Commission operates under a different regulatory framework and that it has no jurisdiction over advice appertaining to an investment that is not a security. In other words, special protections would be desirable for retirement accounts and that, in the view of Congress, would be best handled by the DOL. The Fifth Circuit was mindful of that. But it then found that the DOL did not have the authority to adopt the new fiduciary advice definition (“the Fiduciary Rule…is inconsistent with the entirety of ERISA’s ‘fiduciary’ definition”) and, that by adopting the Fiduciary Rule, it acted arbitrarily and capriciously (“the Rule fails to pass the tests of reasonableness as viewed under the Administrative Procedures Act”). The court vacated the Fiduciary Rule in toto, striking down both its new fiduciary advice definition and the exemptions from it. 

What drove the DOL to turn its back on a wealth of available expertise is inexplicable. The SEC has decades of experience dealing with disclosure, and yet the DOL sought no counsel or advice. In fact, that reach was slapped by the Fifth Circuit, which called out the DOL’s highly questionable authority and vacated its controversial, checked-out rule. The Fifth and Tenth Circuits found it wanting, ordering the DOL to vacate the rule, declaring it unreasonable. It constituted "an arbitrary and capricious exercise of administrative power.” The Department of Labor’s overstepping to transform and regulate in entirely new ways many thousands of financial services providers and insurance companies for retirement plans, falls outside of what is reasonable. 

Enter the SEC

Stepping up quickly to fill the void, the SEC announced its own long-anticipated alternate rule.  Known as Regulation Best Interest (Reg BI), the Commission took a decidedly different approach. SEC Chairman Clayton voiced the concern of many that there needs to be “clarity and harmony to investment advisor, broker-dealer standards of conduct.” SEC Commissioner Michael Piwowar, who along with Clayton voted in favor of the Best Interest proposal, stated, “A solid building block, it imposes a new best-interest standard.” 

Despite Congress’s intentions, Reg BI is the Commission’s answer to the Labor Department’s now defunct rule with the aim of providing a unified fiduciary standard. Commissioner Piwowar has made his distaste for the DOL’s effort obvious. He described it as a “terrible, horrible, no good, very bad” rule due in part to the DOL acting unilaterally without any input from the SEC, FINRA, state securities, and insurance regulators.  

The SEC-proposed rule appears to offer a gentler approach than the DOL. By introducing a uniform standard of conduct for broker-dealers and registered advisers in light of their different relationship types and models for providing advice, the Commission offers a deft touch to regulation. Brokers would be required to disclose conflicts of interest and look to eliminate or “mitigate” them. But, brokerages would be required to mitigate every material conflict of interest. That means the door is open for a carefully applied sales contest. The SEC has stated: “We do not intend our standard to prohibit a broker-dealer from having conflicts when making a recommendation."

With this shift, financial services firms are now free to review their policies as they pertain to retirement accounts. Even with the departure of the Fiduciary Rule, firms want to keep clients’ best interests in the forefront and consistent with just and equitable principles of trade. 

The Defunct Fiduciary Rule vs. the Proposed Best-Interest Rule

So, how do the rules differ? Here are some of the main differences. 

Form CRS

In the view of some commissioners, one of the failings of the DOL rule was that it dismissed the SEC’s experience dealing with conflict of interest disclosure. In this requirement, the SEC is addressing the confusion from the use of misleading titles by financial services professionals. Retail investors must be able to distinguish between the types of financial service providers they can choose. This may include those member firms and associated persons who sell products and those who offer advice as a fiduciary. 

Currently, the many impressive sounding titles used by financial services professionals offer investors little help. For example, under current regulations, anyone can use financial “adviser” or “advisor,” regardless of whether they are registered investment advisers complying with investor protections or not. 

The SEC’s new Form CRS will require financial services professionals to provide their retail customers a simple disclosure form to clarify the scope of customers’ relationships with those who offer them financial services. 

Regulation Best Interest (Reg BI)

In looking for a regulatory alternative to the DOL Fiduciary Rule, the Commission is seeking to ultimately adopt a clear rule for which compliance is not so difficult that firms stop offering retail investors services they can pay for through commissions or other transaction-based fees. This is in stark contrast to the DOL rule. The “best interest” standard is altogether different from the long-established Investment Adviser’s Act fiduciary standard and FINRA’s suitability standard. The ambiguity in the SEC’s proposed rule may likely make it difficult for broker-dealers to know how to comply with it, which could then lead to a decision to stop offering transaction-based services. 

The question must be considered, will Reg BI raise compliance costs to such a level that it becomes disadvantageous for broker-dealers to offer retail investors transaction-based advice?

The SEC’s proposed rule will require:

  • Broker-dealers and registered representatives to not place their interests ahead of those of their retail customers
  • Protection of retail customers from investment strategies that drive up broker-dealer fees
  • Broker-dealers to provide customers with enhanced disclosures of conflicts of interest.

Interpretation of the Standard of Conduct for Investment Advisers

The issue hasn’t received the same hard look as the broker-dealer standard of conduct. Most would be able to identify the “fiduciary duty” as the standard of conduct for investment advisers, but readily identifiable parameters may not be so easy to find. In other words, what precisely does the fiduciary duty demand? The Investment Advisers Act offers few particular obligations related to the standard. Consequently, the proposed interpretation places its requirements from common law principles. 

The DOL’s heavy legal hand will not be missed. The specter of class-action lawsuits no matter how watered down by exemptions or looming private right of action had a chilling effect, causing the abandonment of entire lines of business, in addition to the $5 billion price tag before it was vacated. 

The Commission’s best-interest rule drubbed out the legal axe that hung over the necks of broker-dealers and their associates who failed to pick up the nuances of the DOL’s Fiduciary Rule. The DOL provided a path for customers to sue brokers in class-action lawsuits. The SEC-proposed rule has no such blade in it. This suggests to careful readers that FINRA’s Code of Arbitration will remain the backbone of dispute resolution. 

More Choice

The legality of the SEC stepping up to plug the hole left by the DOL’s Fiduciary Rule being vacated has yet to be decided. The current congress has not made any appreciable noise about it. In that absence, it is safe to say that the SEC’s take is correct. Apart from the plain language approach, which is a welcome break, providing customers more choice is a good thing. The Commission sent a clear message to the financial services industry: inform clients of and eliminate or greatly diminish (not eliminate) conflicts. Informed choice is the underlying principle over the ponderous and legal morass facing those firms that did not toe the line with the Labor Department’s rule.

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Posted by William R James, Senior Content Specialist - April 8, 2019
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Amendments to the CUSIP Rule (MSRB Rule G-34) Effective June 14, 2018

Background

In trading, receiving, delivering, and safekeeping municipal debt securities, it is far easier for dealers to identify a specific bond if it has a CUSIP number assigned to it.1 There are millions of municipal bonds issued, and they can be very similar. For example, an Ohio Turnpike, 4.000%, maturing in October 2028 Series 67760HHE4 can easily be mistaken for an Ohio Turnpike, 4.000%, maturing in October 2028 Series 67760HHF4.

New Requirement

The Municipal Securities Rulemaking Board (MSRB) amended its Rule G-34, on CUSIP numbers. Among other things, the amendments codify the Board’s longstanding interpretive view that BDs are “underwriters” when acting as placement agents of private placements of municipal debt securities, including direct purchases.2

Also, the amendments place a requirement on non-dealer municipal advisors to obtain a CUSIP number when advising an issuer on a competitive underwriting.

That said, the revised rule provides an exception. When dealers and municipal advisors in competitive sales reasonably believe (e.g., by getting a written statement) that the present intent of a purchaser is to hold the bonds to maturity (or earlier redemption or mandatory tender3), the requirement to obtain a CUSIP number may be waived.

Clarification of the Definition of Underwriter

The amendments will delete the existing definition of “underwriter” and instead cross reference to the term “underwriter” as it is defined in Exchange Act Rule 15c2-12(f)(8)4, thus adding wider and clearer understanding of the term as understood by most municipal securities professionals.

All-Inclusive Application of the CUSIP Number Requirements

The amendments will apply the CUSIP number requirements to all municipal advisors advising on a competitive sale of a new issue of municipal securities rather than just some of them. The Board is now of the view that requiring some municipal advisors to obtain CUSIP numbers in competitive sales creates problems.

The amendments also clarify the that a municipal advisor in a competitive sale must make an application for a CUSIP number no later than one business day after dissemination of a notice of sale “or other such request for bids.”

Old Rule
“A financial advisor shall make an application by no later than one business day after dissemination of a notice of sale. Such application for CUSIP number assignment shall be made at a time sufficient to ensure final CUSIP numbers assignment occurs prior to the award of the issue.”

New Rule
“A municipal advisor advising the issuer with respect to a competitive sale of a new issue of municipal securities shall make an application by no later than one business day after dissemination of a notice of sale or other such request for bids. Such application for CUSIP number assignment shall be made at a time sufficient to ensure final CUSIP number assignment occurs prior to the award of the issue.”

The additional language looks to ensure the timing of the application for a CUSIP number where bids are sought in a competitive sale of municipal securities using documentation other than a traditional notice of sale. A municipal advisor in a competitive transaction that applies for the CUSIP number no later than one business day following the distribution of a notice of sale or other request for bids helps safeguard that trading in the new issue can begin without delay following the award.

Provides an Exception to the Requirements in Certain Circumstances

Some banks in direct purchase transactions are reluctant to engage in such a transaction if a CUSIP number is required because some bank purchasers take the view that the transaction is a loan for certain bank accounting purposes. This makes the bank less likely to participate in the financing and hindering the dealer’s ability to directly place the municipal securities, leaving issuers with fewer financing options.

Likewise, where a municipality is purchasing municipal securities to secure its other municipal debt obligations, such as in an advance refunding, there is an expectation that the underlying municipal securities being purchased are intended to be held—not traded in the secondary market.

A dealer (or municipal advisor in a competitive sale) is not required to apply for a CUSIP number in the case of sales of municipal securities to a bank, that is purchasing the municipal securities with funds that are securing or paying, the municipality’s debt issue (e.g., state revolving fund or bond bank), and the dealer (or municipal advisor in a competitive sale) reasonably believes (e.g., by obtaining a written representation) that the purchaser has the present intent to hold the municipal securities to maturity or earlier redemption or mandatory tender.

The Board expects dealers and municipal advisors to work up policies and procedures for arriving at a reasonable belief as to an investor’s intent. Obtaining a written representation from the purchaser is just one example for determining the purchaser’s present intent.

-----

1 CUSIP identifying numbers are provided by CUSIP Global Services, which is managed on behalf of the American Bankers Association by S&P Global Market Intelligence.

2 In a competitive sale, bids from interested dealers are opened at the appointed time and place as advertised in trade periodicals, and the issuer awards the sale to the successful (lowest) bidder that meets all the requirements laid out by the issuer and its advisor. In a negotiated sale, an issuer selects its underwriter following a negotiation of the offering terms. A newer third method to sell bonds is by direct purchase by banks or other financial institutions. Bank direct purchases (BDPs) are an increasingly popular alternative to competitive or negotiated sales.

3 Early redemption may occur on bond issuers’ or bondholders’ intentions. For example, a callable bond may be bought back (called) by the issuer often at a premium to compensate the bond owner for lost interest. This happens when interest rates are declining, and the municipality is looking to refinance its outstanding expensive debt. Most bonds are callable. Occasionally an issuer may provide a put feature giving the bond owner the right to “put” or compel the issuer to repay the bond before maturity typically at par thus allowing the bond owner to reinvest in higher yielding bonds.

4 Exchange Act Rule 15c2-12(f)(8) defines “underwriter” as any person who has purchased from an issuer of municipal securities with a view to, or offers or sells for an issuer of municipal securities in connection with, the offering of any municipal security, or participates or has a direct or indirect participation in any such undertaking, or participates or has a participation in the direct or indirect underwriting of any such undertaking; except, that such term does not include a person whose interest is limited to a commission, concession, or allowance from an underwriter, broker, dealer, or municipal securities dealer not in excess of the usual and customary distributors' or sellers' commission, concession, or allowance.

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Posted by William R James, Senior Content Specialist - April 8, 2019
Abstract investment performance numbers

POINT OF VIEW: DOL Fiduciary Rule DOA, SEC Steps Up

Disclaimer: William R. James is a Senior Editor at Kaplan Financial Education. The opinions expressed in this article are solely those of the author based on personal research and observations. They should not be viewed as legal advice.

Commission Approved Best-Interest Proposal for Brokers

The continuous effort to roll back and stall the Department of Labor’s fiduciary rule by the Trump White House and a sizeable number of influential plaintiffs winning in circuit courts finally worked. Last month the DOL told CNBC, following an order by the Fifth Circuit to vacate, that pending further review it will not be enforcing the 2016 fiduciary rule. With the SEC Commissioners 4-1 approval of its “best interest” proposal on April 18, it appears that the final nail was hammered into the coffin of the Obama-era DOL’s effort to regulate certain advice to pension funds.

The 1,000-page DOL proposal was the sum of years of effort to reign in and regulate the retirement plan advisory business provided by brokers. However, both the Fifth and Tenth Circuits found it wanting, ordering the DOL to vacate the rule, declaring it unreasonable—that it constituted "an arbitrary and capricious exercise of administrative power.” The Department of Labor’s reach by looking to transform and regulate in entirely new ways many thousands of financial services providers and insurance companies for retirement plans, falls outside of what is reasonable. Stepping up quickly, the SEC announced its own long-anticipated alternate rule. Known as Regulation Best Interest, the Commission took a decidedly different approach.

SEC Chairman Clayton voiced the concern of many that there needs to be “clarity and harmony to investment advisor, broker-dealer standards of conduct.” SEC Commissioner Michael Piwowar, who along with Clayton voted in favor of the Best Interest proposal declared it to be “a solid building block...it imposes a new best-interest standard.” While he noted that he has some misgivings, he added, “No longer can people say the SEC needs to do something about this [standard of conduct].” During the obligatory 90-day comment period, Piwowar is hoping to hear comments as to whether the new regulation increases compliance costs for broker-dealers. Commissioner Robert Jackson stated the “need for SEC action has been even more urgent.”

The Bullet Has Been Bitten

I think it’s safe to say without being hyperbolic, that the dollar figure spent by the brokerage industry to comply with a now lifeless rule is staggering. A SIFMA study put the number at $4.7 billion in start-up costs to comply with the anticipated DOL rule. With that investment, it’s not surprising that sizeable broker-dealer advisors look to hang on to the momentum and get something for their money, particularly since they were moving in the fiduciary direction in the first place, seeing it as the business model of the future regardless of what happened to the DOL rule. They’ve bitten the bullet, done a lot of work, and aren’t looking to change anything at this point. Though admittedly, no one can suppress a smile knowing that the specter of class-action lawsuits, no matter how watered down by exemptions or private right of action, no longer looms.

The Commission’s best-interest rule drubbed out the legal ax that hung over the necks of broker-dealers and their associated persons who failed to pick up the nuances of the DOL’s fiduciary rule. The DOL provided a path for customers to sue brokers in class-action lawsuits. The SEC-proposed rule has no such blade in it, suggesting to careful readers that FINRA’s Code of Arbitration will remain the backbone to dispute resolution. I expect disciplinary action will find a way into further review during the 90-day comment period on the new rule.

Working more closely in a fiduciary capacity, including a clear explanation of investments and fees with customers, is a path that works with the fiduciary and best interest standards. The suitability standard is still in play, but its days are numbered by rule and business practice. Bulge-bracket and RIA firms were acting as fiduciaries well before the DOL launched its rule, and those that were gearing up for it will continue as though the Fiduciary Rule was still in force.

Belying the Commission’s nearly 1,000-page proposal that suggests to the mind a comprehensive, batten down the hatches, weighty rule, it appears to offer a gentler approach than the DOL. By proposing a uniform standard of conduct for broker-dealers and advisers in light of their different relationship types and models for providing advice, the Commission offers a deft touch to regulation. Brokers would be required to disclose conflicts of interest and look to eliminate or “mitigate” them, but the Commission does not intend to require brokerages to mitigate every material conflict of interest. That means the door is still open for a carefully applied sales contest. The SEC has stated that, “We do not intend for our standard to prohibit a broker-dealer from having conflicts when making a recommendation."

Reawakened Market Participation

With this somewhat more relaxed approach, the door may hopefully swing the other way, offering significant players that earlier withdrew from the market of servicing retirement investors due to the DOL’s heavy-handed approach a way and desire to get back in. It is possible these former players may reconsider their departure. I hope so.

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Posted by William R James, Senior Content Specialist - April 8, 2019
financial advisor meeting with married couple clients to discuss options

How Series 6, 79, and 99 Examinations Have Changed Now that the SIE Exam is Live

Now that all new representative-level applicants must take the Securities Industry Essentials (SIE) exam, the Series 6, 79, and 99 exams are now specialized knowledge examinations (a revised representative-level qualification examination) for their particular registered roles. As a result, these exams test knowledge relevant to the day-to-day activities, responsibilities, and job functions of those individuals.

Series 6 Breakdown

FINRA has changed the major job functions that are performed by an Investment Company and Variable Contracts Products Representative (Series 6):

  • Function 1: Seeks Business for the Broker-Dealer from Customers and Potential Customers, 12 questions, 24% of exam items
  • Function 2: Opens Accounts after Obtaining and Evaluating Customers’ Financial Profile and Investment Objectives, 8 questions, 16% of exam items
  • Function 3: Provides Customers with Information About Investments, Makes Suitable Recommendations, Transfers Assets and Maintains Appropriate Records, 25 questions, 50% of exam items
  • Function 4: Obtains and Verifies Customers’ Purchase and Sales Instructions; Processes, Completes and Confirms Transactions, 5 questions, 10% of exam items

The fee for the Series 6 is $40 (when combined with the $60 fee for the SIE, it is the same $100 fee as previously), and the exam has 50 scored questions. Consistent with FINRA’s practice of including “pretest” questions on examinations, the Series 6 examination includes five additional, unidentified pretest questions that do not count towards the candidate’s score. The amount of time candidates have to complete the examination is 1 hour and 30 minutes.

All candidate test scores are placed on a common scale using a statistical adjustment process known as equating. Equating scores to a common scale accounts for the slight variations in difficulty that may exist among the different sets of exam items (questions) that candidates receive. This allows for a fair comparison of scores and ensures that every candidate is held to the same passing standard regardless of which set of questions they received. Currently, a score of 70 percent is required to pass the examination.

Download A Candidate's Complete Guide to the New SIE Exam now to learn more about the new proposed licensing process and SIE exam content.

Series 79 Breakdown

The Series 79 exam is designed to assess the competency of entry-level Investment Banking Representatives and seeks to measure the degree to which each candidate possesses the knowledge, skills, and abilities needed to perform the critical functions of an Investment Banking Representative.

FINRA has reorganized the content outline by dividing it into three major job functions that are performed by an Investment Banking Representative. The following are the three major job functions, denoted Function 1 through Function 3, with the associated number of questions:

  • Function 1: Collection, Analysis and Evaluation of Data, 37 questions, 47% of exam items
  • Function 2: Underwriting and New Financing Transactions, Types of Offerings and Registration of Securities, 20 questions, 27% of exam items
  • Function 3: Mergers and Acquisitions, Tender Offers and Financial Restructuring Transactions, 18 questions, 24% of exam items

The questions on the revised Series 79 examination emphasize tasks such as advising on or facilitating debt or equity offerings through a private placement or public offering, and advising or facilitating mergers and acquisitions, tender offers, financial restructurings, and asset sales.

Each function also includes specific tasks describing activities associated with performing that function. There are three tasks (1.1–1.3) associated with Function 1; six tasks (2.1–2.6) associated with Function 2; and six tasks (3.1–3.6) associated with Function 3. For example, one such task (Task 1.3) is conducting due diligence. Further, the content outline lists the knowledge required to perform each function and associated tasks (e.g., due diligence processes on both the buy- and sell-sides). In addition, where applicable, the content outline lists the laws, rules, and regulations a candidate is expected to know to perform each function and associated tasks (e.g., SEC Rule 135a).

The fee for the Series 79 exam is $245 (when that is combined with the $60 SIE fee, it adds up to the fee for the former Series 79 exam), and each candidate’s exam consists of a total of 85 questions (75 scored and 10 unscored). Also included are 10 additional, unidentified pretest items that do not count toward the candidate's score. Candidates are allowed 2 hours and 30 minutes to complete the Series 79 exam.

The passing score for the Series 79 exam is 73%. All candidate test scores are placed on a common scale using a statistical adjustment process known as equating. Equating scores to a common scale accounts for the slight variations in difficulty that may exist among the different sets of exam items that candidates receive. This allows for a fair comparison of scores and ensures that every candidate is held to the same passing standard regardless of which set of exam items they received.

Series 99 Breakdown

The Series 99 content outline is divided into two major job functions that are performed by an Operations Professional. The two major job functions, denoted Function 1 and Function 2, with the associated number of questions are:

  • Function 1: Knowledge Associated with the Securities Industry and Broker-Dealer Operations, 35 questions, 70% of exam items
  • Function 2: Professional Conduct and Ethical Considerations, 15 questions, 30% of exam items.

The questions on the Series 99 examination emphasize tasks. There are nine tasks (1.1–1.9) associated with Function 1 and four tasks (2.1–2.4) associated with Function 2.

For example, one such task (Task 1.1) is opening and maintaining accounts. Further, the content outline lists the knowledge required to perform each function and associated tasks (e.g., types of retail, institutional, and prime brokerage customer accounts). In addition, where applicable, the content outline lists the laws, rules, and regulations a candidate is expected to know to perform each function and associated tasks [e.g., SEA Rule 15c3-3 (Customer Protection—Reserves and Custody of Securities)].

The fee for the Series 99 exam is $40 (when combined with the $60 fee for the SIE, it is the same $100 fee as previously), it has 50 questions, and the test time is 1 hour and 30 minutes (90 minutes). Currently, a score of 68 percent is required to pass the examination. All candidate test scores are placed on a common scale using a statistical adjustment process known as equating. Equating scores to a common scale accounts for the slight variations in difficulty that may exist among the different sets of exam items that candidates receive. This allows for a fair comparison of scores and ensures that every candidate is held to the same passing standard regardless of which set of exam items they received.

Consistent with FINRA’s practice of including “pretest” questions on examinations, the Series 99 examination includes five additional, unidentified pretest questions that do not count towards the candidate’s score.

The exam consists of 50 multiple-choice items, and each item consists of four answer choices.

Want to Further Your Knowledge?

Now that you've gotten a deeper look at the new Series 6, 79, and 99 exams, learn more about how the SIE exam has impacted the Series 7 licensing exam

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Posted by Doug Vincens, Securities Product Director - April 8, 2019
Man learning about changes to Series 6, 79, and 99 examsd on his tablet

POINT OF VIEW: The DOL’s Fiduciary Rule–Vacated by The Fifth

Disclaimer: William R. James is a Senior Editor at Kaplan Financial Education. The opinions expressed in this article are solely those of the author based on personal research and observations. They should not be viewed as legal advice.

The Ongoing Suitability v. Fiduciary Standard Clash
The Fifth and Tenth Circuit Courts Weigh In

Over the past year, Kaplan has kept you apprised of the potential impact of the U.S. Department of Labor (DOL) fiduciary rule. We have looked to decipher the rule and answer your questions, particularly regarding Investment Adviser Registration. We have given you background starting with the Employee Retirement Income Security Act of 1974 (ERISA), the statute that governs the non-tax aspects of the implementation and operation of an employee pension benefit plan; as well as the Employee Benefits Security Administration (EBSA) division of the U.S. Department of Labor (DOL), which is tasked with the administration of ERISA.

In 1975 the EBSA issued guidance interpreting the statutory definition of investment advice fiduciary found in ERISA. That guidance remains in effect today. That same EBSA began the process of updating the regulatory definition of investment advice fiduciary by issuing proposed regulations in 2010 that looked to substantially change the regulatory definition of investment advice fiduciary in effect for 43 years.

In short, over the past eight years, the Federal Government has looked to promulgate rules and laws that impact an enormous swath of American commerce at a compliance burden estimated by the government to cost somewhere near $32 billion over ten years. To say nothing of the unsettled nerves knowing that a fresh army of federal regulators will be descending to enforce the new rule with all the accompanying fines for infractions small and large. The comprehensive and apparently capricious rule (its treatment of variable and fixed index annuities) appears to be open for plenty of interpretation. This long developing DOL regulatory scheme has hit more than one roadblock.

The Fifth Circuit Court of Appeals

The DOL’s 1,000-page fiduciary rule is seen by the plaintiffs in a recent case heard by the Fifth Circuit as an undiscovered country of regulatory bear traps. The Chamber of Commerce, SIFMA, and nearly two dozen other securities and insurance heavyweights argued against the U.S. DOL that the rule is corrosive to confidence and trust (ironically the heart of fiduciary behavior) between the lawmakers and the governed. Predictably, the DOL’s pledge to alleviate the concerns of regulated companies, particularly regarding vexing interpretative issues that will arise by offering them the same “broad assistance for regulated parties on the Affordable Care Act regulations,” did little to sooth apprehensions by the plaintiffs in this month’s successful case against the Department of Labor’s fiduciary rule.

Settled Law

The Fifth Circuit Court of Appeals agreed with three substantive plaintiff groups that 50 years of legal practices in the trillion-dollar retirement markets is, to all reasonable minds, settled. That the Department of Labor’s reach in April 2016 by looking to transform and regulate in entirely new ways many thousands of financial services providers and insurance companies for retirement plans, falls outside of what is reasonable and challenges the DOL on its ability to issue rules that fundamentally transforms settled legal practices in the financial services and insurance industries.

“Settled law” or “black letter law” is an expression that has come into common parlance in recent years as it is often used in legal arguments to add gravitas. The expression is sometimes used in-judiciously to argue for those laws and rules passed relatively recently, spurring controversy that works to unravel the so-called settled issue. Suggesting settled law, however, is persuasive only if in fact it is proven to be so over time. Settled law as used by the financial services and insurance industry was favorably argued to the Fifth Circuit.

The Tenth Circuit Court of Appeals

Within days of the decision to vacate by the Fifth, the Tenth Circuit ruled against Market Synergy Group in its lonely bid to argue that it would never be able to reach the BICE, the Best Interest Exemption, and that the court should provide a door for them to work under an “84–24 Exemption,” perceived to be a workaround for commission-based compensation customarily used in the sale of fixed-index annuities. The Prohibited Transaction Exemption (PTE 84-24) permits traditional, variable commission compensation, but the purchase by a plan or IRA of a variable annuity contract or indexed annuity contract is carved out of PTE 84-24, leaving those in that industry scratching their heads.

Where From Here?

Soon after taking the oath of office, President Donald Trump asked for a review of the rule, immediately delaying implementation until June 9, 2017, with a transition period for some exemptions extending to January 1 of this year. Full implementation was pushed back to July 1, 2019.

The Fifth Circuit Court of Appeals, vacating the rule as unreasonable and that it constitutes "an arbitrary and capricious exercise of administrative power,” matched with the Tenth Circuit’s decision in mid-March, throws this fiduciary rule into a harsh light. Circuit courts at odds with other circuit courts lines this rule up in the gun sights of a U.S. Supreme Court appeal. The DOL’s next stop could be en banc to the Fifth to hear again or up to the Supreme Court. Then again, it may be dropped entirely.

On March 19, the DOL told CNBC that "pending further review" it "will not be enforcing the 2016 fiduciary rule." I sense that the DOL will yield to the Securities and Exchange Commission to run with this ball. SEC Chairman Clayton has not shied away from his thoughts that there needs to be “clarity and harmony to investment advisor, broker-dealer standards of conduct.” With a full complement of commissioners, and the vacuum caused by the vacating Fifth Circuit, and a warmer feeling generally throughout the financial services industry that the Commission should have had their oar in this water from the beginning, we can almost certainly look for a complete redo of the Fiduciary Rule under the banner of the SEC in the year ahead.

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Posted by William James, Senior Content Specialist - April 8, 2019
Gavel on the stand to signify 5th circuit court of appeals decision to vacate the DOL Fiduciary Rule

How Series 7 Has Changed Since the SIE Exam Launched

With the advent of the Securities Industry Essential (SIE) exam, FINRA has restructured their examination programs into a new format. All new representative-level applicants will be required to take the SIE exam, and a tailored, specialized knowledge examination (a representative-level qualification examination) for their particular registered role. 

As part of the 2018 restructuring process, FINRA has created a tailored top-off examination for earning the Series 7 license. The new Series 7 tests knowledge relevant to the day-to-day activities, responsibilities, and job functions of general securities representatives. 

Download A Candidate's Complete Guide to the New SIE Exam now to learn more about the new proposed licensing process and SIE exam content.

Revised Series 7 Exam Breakdown

Fees—The cost of the exam is $245. (When you combine it with the $60 fee for the SIE, the cost becomes the same as in the past.)

Number of Questions—The exam consists of 125 multiple-choice questions (down from 250), and each question consists of four answer choices. Each candidate’s exam includes 10 additional, unidentified pretest questions that do not contribute toward the candidate's score. The pretest questions are randomly distributed throughout the exam. Therefore, each candidate will see a total of 135 questions (125 scored and 10 unscored).

Allowed Time to Complete Exam—Candidates are allowed 3 hours and 45 minutes to complete the Series 7 exam. (The exam used to be 6 hours.)

Scoring—The passing score is 72%. (This is the same as the passing score for the previous exam.) Candidate test scores are placed on a common scale using a statistical adjustment process known as equating. Equating scores to a common scale accounts for the slight variations in difficulty that may exist among the different sets of exam questions a candidate receives. This allows for a fair comparison of scores and ensures that every candidate is held to the same passing standard regardless of which set of exam questions they received.

Content Outline—FINRA has also made changes to the major job functions that are done by a General Securities (Series 7 licensed) Representative. The following are the revised job functions (1 through 4) with the associated number of questions:

Function Description% of Exam# of Questions
1 - Seeks Business for the Broker Dealer from Customers and Potential Customers7%9
2 - Opens Accounts after Obtaining and Evaluating Customers' Financial Profile and Investment Objectives9%11
3 - Provides Customers with Information About
Investments, Makes Suitable Recommendations,
Transfers Assets and Maintains Appropriate Records
73%91
4 - Obtains and Verifies Customers’ Purchase and Sales
Instructions and Agreements; Processes, Completes
and Confirms Transactions
11%14
TOTAL100%125

 

In each function, the questions on the Series 7 examination emphasize “tasks.” There are two tasks (1.1–1.2) associated with Function 1, four tasks (2.1–2.4) associated with Function 2, four tasks (3.1–3.4) associated with Function 3, and four tasks (4.1–4.4) associated with Function 4.

For example, one such task (Task 1.1) is specified as: “Contacts current and potential customers in person and by telephone, mail and electronic means; develops promotional and advertising materials and seeks appropriate approvals to distribute marketing materials.”

Further, the content outline lists the knowledge required to perform each function and associated tasks (e.g., Standards and required approvals of public communications) and lists the laws, rules, and regulations a candidate is expected to know to perform each function and associated tasks (e.g., FINRA Rule 2210—Communications with the Public).

Looking for more information?

The introduction of the SIE exam will also have an effect on Series 6, 79, and 99. Learn more about the changes coming to these exams in this article. You can also check out all the education and exam preparation packages Kaplan offers for securities licensing here.

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Posted by Mark Sanchiro, Senior Securities Editor - April 8, 2019
Woman studyinfg for the Series 7 exam on her PC.

FINRA Rule 2165 and Update to Rule 4512 to Protect Seniors Now Effective

In February 2017, the Financial Industry Regulatory Authority (FINRA) proposed new FINRA Rule 2165 (Financial Exploitation of Specified Adults) and amendments to FINRA Rule 4512 (Customer Account Information). The Securities Exchange Commission (SEC) approved them both in March 2017. The new rules became effective on February 5, 2018.

These two rules tie together topics of concern FINRA has expressed over several years as a way to ensure firms pay closer attention to seniors, and potentially other specified adults, who have been described as “easy targets,” underserved and, most often, the main victims of fraud and abuse.

Rule 2165, at its core, allows a securities firm to place a temporary hold on a disbursement of funds or securities from the account of a specified adult if the firm has a reasonable belief a questionable request has been made regarding financial exploitation of a customer.

The amendments to Rule 4512 require firms to make reasonable efforts to implement a “trusted contact” system into their customer accounts.

We believe these two rules together will not only represent best practice planks, which will impact the industry in a much-needed positive direction, but will also be an important consideration for all those preparing to take securities exams. The depth of support needed to show compliance on an individual exam is yet to be determined. However, based on the current regulatory framework and an aging population, their significance cannot be overlooked.

Any firm with retail customers is expected to abide by the tenants of the regulations, but due to the fact these are new rules, they may not have made it into our printed material in time to be added to the study material. As such, we are preparing to add this content into our digital delivery systems via updates on the students online Dashboard.

New FINRA Rule 2165—Placing a Temporary Hold on Disbursements

New Rule 2165 permits a member that reasonably believes that financial exploitation

  • has occurred,
  • is occurring,
  • has been attempted,
  • or will be attempted…

to place a temporary hold on the disbursement of funds or securities from the account of a “specified adult” customer.

The rule does not mandate or require a firm to withhold a disbursement of funds or securities. It actually creates a “safe harbor” from activities which, without new rule 2165, would otherwise be violations when withholding, even temporarily, a requested disbursement from a client’s account. In essence, it allows the firm to step back from a disbursement request and ask, “Does this request fall into what is a normal or expected request”? In other words, when members exercise discretion in placing temporary holds on disbursements of funds or securities from the accounts of specified adults, the new rule offers a response.

A couple of definitions are useful to see as well, since they are new terms to the regulations.

  • Specified Adult:
    • A natural person age 65 and older or (B) a natural person age 18 and older who the firm reasonably believes has a mental or physical impairment that renders the individual unable to protect his or her own interests. The firm’s decision may be based on the facts and circumstances observed in the member’s business relationship with the person.
  • Financial Exploitation:
    • (A) The wrongful or unauthorized taking, withholding, appropriation, or use of a specified adult’s funds or securities; or
    • (B) any act or omission taken by a person, including through the use of a power of attorney, guardianship, or any other authority, regarding a specified adult, to: (i) obtain control, through deception, intimidation or undue influence, over the specified adult’s money, assets or property; or (ii) convert the specified adult’s money, assets or property.

It is important to note, a temporary hold pursuant to the rule may be placed on a particular suspicious disbursement(s), but not on other, non-suspicious disbursements. Rule 2165 does not apply to transactions in securities. For example, Rule 2165 would not apply to a customer’s order to sell his shares of a stock. However, if a customer requested that the proceeds of a sale of shares of a stock be disbursed out of his account at the member, then the rule could apply to the disbursement of the proceeds where the customer is a “specified adult” and there is reasonable belief of financial exploitation.

Highlights of Rule 2165

  • If a member places a temporary hold, Rule 2165 requires that the member immediately initiate an internal review of the facts and circumstances.
  • The rule requires the member to provide notification of the hold and the reason for the hold to the trusted contact person and all parties authorized to transact business on the account.
  • The temporary hold authorized would expire not later than 15 business days after the date that the member first placed it, unless otherwise terminated or extended.
  • The rule permits the member to extend the temporary hold for an additional 10 business days.

Trusted Contact Person—Amendments to Rule 4512

The amendments to Rule 4512 require members to make reasonable efforts to obtain the name of and contact information for a trusted contact person upon the opening of a non-institutional customer’s account or when updating account information for a non-institutional account in existence prior to the effective date of the amendments. The trusted contact person is intended to be a resource for the member in administering the customer’s account, protecting assets, and responding to possible financial exploitation.

The amendments do not prohibit members from opening and maintaining an account if a customer fails to identify a trusted contact person, as long as the member makes reasonable efforts to obtain the information. Asking a customer to provide the name and contact information for a trusted contact person ordinarily would constitute reasonable efforts to obtain the information and would satisfy the rule’s requirements.

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Posted by Mitch Crabbe, Securities Content Specialist - April 8, 2019
elderly couple meeting with their financial advisor

Securities Industry Essentials (SIE) Exam Frequently Asked Questions for Businesses

The introduction of FINRA’s new Securities Industry Essentials (SIE) in October 2018 has dramatically changed the securities licensing process. We’ve assembled and answered this list of the most common questions we’ve been fielding from partner firms in recent months.

How does the SIE exam impact our firm’s recruitment efforts?

There are many potential benefits of FINRA restructuring the securities exams, particularly for firms who want to be more efficient in their recruiting and onboarding processes. Your firm now has options when onboarding new reps, including making the SIE exam a condition of employment, having new hires pass the SIE exam prior to taking a specialized knowledge exam, or asking new hires to take both exams together.

How does the SIE exam affect our onboarding process?

Candidates now have to pass multiple exams before registering with FINRA, which may extend the onboarding process to account for exam scheduling, testing, and waiting periods for retakes.

How are our current license holders impacted by the introduction of the SIE exam?

Based on FINRA Regulatory Notice 17-30, the following individuals are considered to have passed the SIE exam:

  • Individuals who registered as representatives before October 1, 2018, and who continue to maintain those registrations on or after October 1, 2018.
  • Individuals whose registration as a representative was terminated between October 1, 2014 and September 30, 2018, provided they re-register as a representative within four years from the date of their last registration

All other individuals seeking representative-level registration must pass the SIE exam, unless they obtain a waiver.

How can our firm strategically use this change to our advantage?

Thinking strategically, the SIE exam allows firms to create pipelines of qualified candidates, reduce onboarding and recruiting costs, increase speed to production, and build more agile and effective workforces.

Can our firm partner with an education provider to provide SIE exam prep?

Yes. A number of training providers offer exam preparation courses and programs designed to assist students with passing the new SIE exam and top-off exams. Kaplan currently offers classroom, online, and blended exam prep programs to more than 90,000 successful candidates annually. These same proven approaches are being used to implement SIE-related programs within more than 1,500 universities, many of which Kaplan is currently partnering with to offer CFP® certification education and CFA®-based curricula, as well as more than 1,000 corporate partners. Our integrated strategy is to connect these universities with potential employers to provide sources of highly qualified candidates, while also preparing individuals to pass the SIE and top-off exams and supporting their future careers in the securities industry.

Can I use a candidate’s passing of the SIE exam as a reliable predictor of how they will perform on their FINRA series exams?

While candidates passing of the SIE exam can prove mastery of basic industry knowledge and demonstrate proficiency in handling a high-stakes exam experience, it is too early to determine any correlation on how they will perform on their respective top-off exams.

How should we adapt our internal training program and process to accommodate the SIE exam?

You have different options for onboarding new hires:

●     Hire applicants who have already successfully passed the SIE exam.

●     Onboard individuals and require them to take the SIE exam prior to top-off exam.

●     Request new hires to take both the SIE and top-off exams together.

Additionally, many of the firms Kaplan partners with on corporate training programs have expressed an interest in using the SIE exam for their non-registered administrative employees. Having a better understanding of the industry helps create more agile and effective workforces, which is key to growth and competitive positioning.

What are the benefits of the changes for companies?

By creating pipelines of candidates who have demonstrated mastery of fundamental securities-related knowledge, firms are able to reduce costs associated with recruiting and licensing. Most importantly, firms can mitigate the drain on productivity when bringing on new hires. Firms that currently have, or plan to develop, relationships with local universities have an advantage in leveraging the benefits of this new exam. As noted previously, many of the firms we have talked to are interested in having their administrative staff prepare and sit for the SIE exam as well.

What are the challenges caused by the introduction of the SIE exam?

Many firms are concerned that individuals who have passed the SIE exam will misrepresent their qualifications with investors. In response, FINRA plans to implement SIE Rules of Conduct that require individuals to attest that they are not qualified to conduct securities business with the public until they meet the additional requirements of being associated with a firm and passing a specialized knowledge exam.

Additionally, candidates now have to pass multiple exams before registering with FINRA, which may extend the onboarding process to account for exam scheduling, testing, and waiting periods for retakes.

Finally, for those firms who want to hire individuals without the SIE credential, the total exam fees will likely stay the same. For example, the exam fee for the current Series 7 exam is $305.  The SIE exam fee is $60, and the exam fee for the new Series 7 top-off exam will be the balance ($245) of the current fee.

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We hope this article has helped clear up confusion and answer any questions you have about the SIE Exam, and how it affects your firm.  If you're looking for more information, you can access our SIE Information Center. We've also created FAQs for candidates and universities to answer SIE-specific questions.

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Posted by Doug Vincens - April 8, 2019
Pair of business professionals interviewing a candidate for a new financial services role

Securities Industry Essentials (SIE) Exam Frequently Asked Questions for Universities

FINRA introduced the new Securities Industry Essentials (SIE) exam on October 1, 2018. The SIE exam is a game-changer for universities and students hoping to jumpstart a career in financial services before they graduate. Kaplan has been following the news ever since FINRA first began talking about it. Along the way, our university partners have relied on us for the latest information on the SIE exam, and how it will impact their school and students. We developed this article to provide answers to the questions we hear most often—and to keep you and the rest of your faculty informed.

What Is the Securities Industry Essentials (SIE) exam?

The SIE exam is FINRA's new general industry exam. It tests basic knowledge such as products, risks, the structure and function of the securities industry and its regulatory agencies, and regulated and prohibited practices. The SIE exam is the first step for anyone earning a Series 6, 7, 22, 57, 79, 82, 86/87, or 99 license, if they do not already possess one of those licenses. Passing the SIE exam alone does not qualify an individual for registration with FINRA. They also need to pass a specialized knowledge qualification exam (or "top-off") applicable to the desired job function with a firm, and meet other registration requirements. FINRA calls the SIE and the top-off exams "corequisites," which means that both have to be passed to earn the license, but can be taken in any order. In other words, it's possible to take a top-off exam before the SIE, but they will still have to take the SIE.

What opportunities does the Securities Industry Essentials (SIE) exam offer a university?

This exam is ideal for universities to implement as part of their curriculum or as a professional development program. Doing so could increase job placement opportunities for students, add a new revenue stream, and enhance relationships with financial services employers.

What do my students need to know about the Securities Industry Essentials (SIE) exam?

With a low exam fee ($60) and no firm sponsorship requirement, the SIE is ideal for university students who want a headstart in a financial services career. By proving their mastery of basic industry knowledge and demonstrating that they can pass a high-stakes examination, students will stand out to potential employers. We’ve created a FAQ for candidates as well, designed to answer all of the questions your students might have about the new exam.

How will the SIE exam impact our students?

Individuals who are able to add the SIE to their resume and, more importantly, demonstrate general industry knowledge, will stand out to potential employers during job interviews and within post-hire training programs.

What are the prerequisites for the SIE exam? Can students take it any time?

The SIE exam is open to anyone aged 18 and older, including students and prospective candidates interested in demonstrating basic industry knowledge to potential employers. Because you are not required to be sponsored to take this exam, students do not need to be hired by a firm in order to sit for this entry level exam.

Which topics will be covered on the new SIE exam?

The range of topics covered on the SIE exam include:

  • Knowledge of Capital Markets
  • Understanding Products and their Risks
  • Understanding Trading, Customer Accounts and Prohibited Activities
  • Overview of the Regulatory Framework

Will any topics be added to the top-off exams now that topics are being removed to create the SIE exam?

The revised representative-level qualification exams will test knowledge relevant to day-to-day activities, responsibilities, and job functions of representatives.   In February 2018, FINRA released the content outlines for the top-off exams.  In additional articles, we have outlined the breakdown of each major exam and explained the differences between current and future exams for Series 7, as well as the Series 6, 79, and 99 Exams.

Could our university offer SIE exam preparation as part of our curriculum?

Yes! In fact, Kaplan partners with universities to offer Securities Licensing Exam Prep to students, alumni, and their local community. Through these partnerships, schools enter into a Marketing Service Agreement and receive payment in exchange for promoting the courses. Kaplan builds co-branded custom portals for students to enroll. In addition to SIE Exam Prep, partners are also able to offer additional Kaplan exam prep packages for other licensing exams, such as Series 65.

How does the SIE exam prep course fit into an undergraduate business degree?

A career opportunity is the ultimate goal for most undergraduate business students. Building a curriculum around the topics covered in the SIE exam can fast-track your students’ path to earning a series license and starting a career in finance. Kaplan has taken these topics and has incorporated them into a simple path to teaching securities industry essentials in your financial course. These topics include:

  • Knowledge of Capital Markets
  • Understanding Products and their Risks
  • Understanding Trading, Customer Accounts and Prohibited Activities
  • Overview of the Regulatory Framework

Kaplan will work with your university to offer SIE Exam Prep and receive the course curriculum. We build co-branded custom portals for university partners' students to purchase materials, and allow you to manage the program. To learn more about the SIE Exam, access our SIE Information Center.

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We hope this article has helped clear up confusion and answer any questions you have about the SIE Exam, and how it will affect your university.  If you're looking for more information, we've also created FAQs for candidates and businesses to answer SIE-specific questions. 

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Posted by Kaplan Financial Education - April 5, 2019
college student raising her hand to ask questions about the SIE exam

Securities Industry Essentials (SIE) Exam Frequently Asked Questions for Candidates

If you’re planning to earn your first securities license in the near future, you’ve likely heard that FINRA recently created an exam called the Securities Industry Essentials (SIE) exam. We are receiving an increasing number of questions about this exam. This article answers the most frequently asked questions, equipping you with the information you need to plan for this next step in your career.

What is the Securities Industry Essentials (SIE) exam?

The SIE exam is FINRA's general industry exam. It tests basic knowledge of products, risks, the structure and function of the securities industry and its regulatory agencies, and regulated and prohibited practices. Although ideal for university students and career changers, anyone can sit for the exam without prior association with a firm.

Do I need to have a sponsoring employer to take the SIE exam?

No. FINRA does not require sponsorship with a firm to sit for the SIE exam. However, to become registered with FINRA and seek a representative level role with an employer, candidates must also pass a revised, specialized knowledge qualification exam (or "top-off"), applicable to their job function with the firm.

Taking the SIE exam? Download the free eBook, A Candidate's Complete Guide to the SIE Exam, for valuable information about the test contents and the securities licensing process.

Can I take the SIE exam while I am still in college?

Yes! With a low exam fee ($60) and no firm sponsorship requirement, the SIE exam is ideal for university students who want to get a head start on a financial services careers and, most importantly, stand out to potential employers by proving their mastery of basic industry knowledge and the ability to pass a high-stakes examination.

When will FINRA implement the SIE exam?

The SIE exam is now available at all Prometric testing centers.

Do I need to take the SIE exam if I already have a securities license?

Based on FINRA Regulatory Notice 17-30, the following individuals are considered to have passed the SIE exam:

  • Individuals who registered as representatives before October 1, 2018, and who continue to maintain those registrations on or after October 1, 2018.
  • Individuals whose registration as a representative was terminated between October 1, 2014 and September 30, 2018, provided they re-register as a representative within four years from the date of their last registration

All other individuals seeking representative-level registration must pass the SIE exam, unless they obtain a waiver.

Is the SIE Exam a paper or computer-based exam?

Like all other securities licensing exams, the SIE is administered by computer at a Prometric testing center.

What topics are covered on the SIE exam?

The range of topics covered on the SIE exam include:

  • Knowledge of Capital Markets
  • Understanding Products and their Risks
  • Understanding Trading, Customer Accounts, and Prohibited Activities
  • Overview of the Regulatory Framework.

How many questions are on the SIE exam?

The SIE exam has 75 multiple-choice questions, plus 10 additional experimental questions. The breakdown is as follows:

Sections % of Exam # of Exam Questions
Knowledge of Capital Markets 16% 12
Understanding Products and their Risks 44% 33
Understanding Trading, Customer Accounts and Prohibited Activities 31% 23
Overview of Regulatory Framework 9% 7
TOTAL 100% 75

 

How can I use the SIE to my advantage in my career?

The SIE gives you a head start on a financial services career. Current or potential employers are more likely to notice you because you can prove you have a grasp of basic industry knowledge and the ability to pass a high-stakes examination.

Do I earn a securities license for passing the SIE exam?

Passing the SIE exam alone does not qualify you for registration with FINRA. You must also pass a revised, specialized knowledge qualification exam (or "top-off") applicable to the desired job function with a firm, and meet other registration requirements. Note that FINRA calls the SIE and the "top-off" exams "corequisites," which means you have to pass both as part of the licensing process, but you can take them in any order. For example, you can take the Series 7 exam before the SIE, but you will still have to take the SIE at some point to be licensed.

What happens after I pass the SIE exam?

To become registered with FINRA and seek a representative level role with an employer, you must also pass a revised, specialized knowledge qualification exam (or "top-off") applicable to your job function with the firm.

If I do not pass the SIE Exam, what is the wait time before I can retake it?

The rules for retaking the SIE exam are the same as for all FINRA series licenses. After your first attempt, you are required to wait 30 days before retaking the test. After your second attempt, you again have to wait 30 days to retake the exam. After your third failing attempt, you are required to wait 180 days before retaking the exam.

How long after passing the SIE exam can I wait to take a top-off exam and earn a securities license?

After passing the SIE exam, you have up to 4 years to pass the representative-level "top-off" exam for registration with FINRA and association with a firm.

How does the SIE exam change the way the existing securities licensing exams are offered today?

The SIE exam acts as a corequisite exam—to become registered with FINRA and seek a representative level role with an employer, candidates must also pass a revised, specialized knowledge qualification exam (or "top-off") applicable to their job function with the firm. FINRA has changed the number of questions required for these new exams from the current exams as you can see in this table:

Registration Category As of October 1, 2018
Investment Company Represent (IR) Series 6: 50 Questions
General Securities Representative (GS) Series 7: 125 Questions
DPP Representative (DR) Series 22: 50 Questions
Securities Trader (TD) Series 57: 50 Questions
Investment Banking Representative (IB) Series 79: 75 Questions
Private Securities Offerings Representative (PR) Series 82: 50 Questions
Research Analyst Series 86 + Series 87: 100 Questions + 50 Questions
Operations Professional (OS) Series 99: 50 Questions

 

These representative-level exams test knowledge relevant to day-to-day activities, responsibilities, and job functions of representatives. Learn the specifics in our article about Series 7 and our other article about the Series 6, 79, and 99 Exams.

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We hope this article answers all of your questions about the SIE Exam and how it affects your securities licensing process. If you're looking for more information, you can access our SIE Information Center. We've also created FAQs for universities and businesses to answer SIE-specific questions.

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Posted by Kaplan Financial Education - April 5, 2019
Woman sitting on couch at home researching the SIE exam on her laptop

How 2018 Tax Changes Impacted Securities Qualifications Exams

In December 2017, President Trump signed the new federal tax code into law with most of its provisions taking effect on January 1. Although the new code is complicated, our subject matter experts have reviewed those parts of the code that could likely impact qualification examinations.

We’ve detailed below some key elements of the new tax code that could affect the Series 6, Series 7, Series 52, Series 53, Series 24, Series 26, Series 10, Series 65 and Series 66.  Our staff senses that it is unlikely that tax-related questions will change abruptly. It is more likely that old questions will be removed from test question banks and new questions integrated over time, keeping true to best practices for quality assurance. (An excellent way to be ready for any changes is to consider a prep package for the exams that are affected).

Thinking about a career in securities? Download our free eBook, Launching Your Securities Career, to get tips and advice from 100+ securities professionals.

Here are some possible elements of the new tax code that we expect to appear on the various qualification examinations at some point this year or next.

Kiddie Tax
Earned income is still taxed the same...to the child. The change is to unearned income. Instead of being taxed at the parent’s top rate, everything above the $2,100 threshold is now taxed using the trust and estate’s table.

Section 529 Plans
For the first time, funds contributed to a Section 529 Plan will be permitted to be used for qualified expenses for K-12 education. Qualified expenses include tuition at an elementary or secondary public, private or religious school, for up to $10,000 per year.

Corporate Tax Rates
Instead of a graduated rate, there is a flat 21% tax applied to earnings of C corporations. The 70% dividends received exclusion now falls to 50%. This change applies if the ownership of the dividend-paying company is less than 20%.

Annual Gift Tax Exclusion
This exclusion increased from $14,000 to $15,000.

Other Changes for 2018

Even before the new tax bill was signed, there were some changes for 2018, mainly to retirement plan contributions. Here is a list of some of the items that have and haven’t changed:

Traditional and Roth IRAs
No changes made, either to the annual maximum contribution or the catch-up for those 50 and older.

Traditional and Roth IRA Phase-outs
The traditional IRA deductibility phase-out for those covered by employer-sponsored plans begins at $63,000 and ends at $73,000 for singles and $101,000 to $121,000 for married couples.

The Roth IRA eligibility phase-out begins at $120,000 and ends at $135,000 for singles, and $189,000 to $199,000 for married couples.

SEPs
Maximum contribution is $55,000.

S.I.M.P.L.E Plans
There are no changes.

401(k) and 403(b) Plans
Maximum elective deferrals increased to $18,500. Maximum with employer contribution rose to $55,000.

Keogh Plan
Maximum total contribution increase to $55,000.

Non-retirement Plan Changes Estate and Lifetime Gift Exclusion
This exclusion increased to $5.6 million per person with a married couple enjoying an exclusion of $11.2 million.

Top Tax Rates
The highest marginal tax rate reduced to 37% on a joint return, with taxable income exceeding $600,000 on a joint return and exceeding $500,000 on a single return.

Trust and Estate Taxation
The only change has been to the levels, and the concept remains the same—tax brackets are highly compressed. That is, once the trust’s (or estate’s) income exceeds $12,500, it is taxed at the new top rate of 37%.

Pass-through Entities
This change affects those entities issuing a Schedule K-1, including S corporations, LLCs, partnerships and, although not technically a pass-through, sole proprietorships. There is a 20% deduction against qualified business income (QBI) subject to earnings limits for “service” business, such as financial planners,  doctors, accountants, and lawyers (joint filers earning more than $315,000). The nature of the computation and various options is highly complicated.

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Posted by Kaplan Financial Education - April 5, 2019
Tax return paperwork and a writing utensil

RIA vs IAR: What is the Difference?

There are loads of acronyms in the financial services industry. What is an RIA? What is an IAR? Are they used interchangeably? These are frequently asked questions by people who are considering a career in the securities and commodities industry. Read on to find out more about RIAs and IARs, and when you should properly use each term.

What is an RIA (Registered Investment Adviser)?

Although it sounds like an individual job title, a Registered Investment Adviser (RIA) refers to a firm that is registered with the Securities and Exchange Commission (SEC) or a state’s securities agency. Now, an individual who works for a RIA is an Investment Advisor Representative (IAR).

A quick Google search for RIA will reveal that many people misuse the term, instead referring to a professional designation for individuals who provide investment advice. An individual cannot be an RIA; however, the individual could have her own RIA firm. Even if that is the case, however, she is still an IAR representing her own RIA.

Thinking about a career in securities? Download our free eBook, Launching Your Securities Career, to get tips and advice from 100+ securities professionals.

What is an IAR (Investment Adviser Representative)?

An Investment Adviser Representative (IAR) is an individual who works for an investment advisory company (e.g., RIA, broker-dealer) and provides investment-related advice for a fee. IARs are limited in what advice they can provide based on which licenses they hold.

According to the North American Securities Administrators Association (NASAA), three essential elements characterize an investment adviser:

  • Provides advice or analysis about securities
  • Receives compensation for the advice they provide
  • Engages in regular business of providing advice about securities

Is there a difference between an advisor and an adviser?

No, not really. Registered Investment Adviser (RIA) and Investment Adviser Representative (IAR) both use an “e-r” in adviser because the Investment Advisers Act of 1940 defines both the terms RIA and IAR using adviser with an e-r. If the individual or firm is registered, then adviser is supposed to be spelled with an e-r.

With that being said, advisor with an “o-r” is commonly used in the securities industry. The meaning is the same whether it is spelled adviser or advisor; however, if you are writing out Registered Investment Adviser or Investment Adviser Representative, you should always use the e-r spelling because that is the way the law is written.

Become an Investment Adviser Representative

If you are interested in becoming an Investment Adviser Representative, the first step to getting licensed is passing the Series 65 exam, or the Series 7 and Series 66 exams. Unlike other securities licensing exams, you do not need to be sponsored by a firm or broker-dealer to take the Series 65 exam.

If you have another professional designation, such as the CERTIFIED FINANCIAL PLANNER mark or the Chartered Financial Analyst® charter, you may be able to waive the Series 65 exam. Check with your state for more details.

If you are considering starting your own RIA, check out this article on the important things to consider about being your own boss.

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Posted by Kaplan Financial Education - April 1, 2019
Woman considering the difference between an RIA and an IAR

New Securities Trader and ​Securities Trader ​Principal Registration Categories​

The Securities and Exchange Commission recently approved FINRA’s request to replace the Series 55 Exam and registration category (Equity Trader) with the new Series 57 Exam (Securities Trader). Starting back in April, FINRA conducted a job analysis survey as part of the development of the new examination which it is looking to launch in January 2016.

Unlike the Series 55 exam, the new Series 57 exam will have no prerequisites. This is in harmony with FINRA’s current effort to eliminate redundancies and inefficiencies in the current testing regime. However, the Series 57 will include the “core” knowledge portion of the upcoming Securities Industry Essentials Examination (SIE).

Those persons who are appointed to supervise applicable securities trading activities will have to qualify as a Securities Trader Principal, a new registration category. They will do this by passing both the Series 57 and the Series 24 examinations. There is a grandfathering provision for those who pass the Series 55 and Series 24 exams prior to effective date.

The upcoming Series 57 is geared to qualify those registered persons who execute trades on electronic marketplaces such as NASDAQ, OTCBB and other OTC equity trading systems as well as options trades executed on the CBOE.

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Posted by William James, Senior Content Specialist - March 22, 2019
Zoomed in view of investment performance or prices

New Jersey Now Requires Series 63 Exam for Broker-Dealers

Effective August 17, 2015, New Jersey joined the vast majority of states requiring passing the Uniform Securities Agent State Law Exam (Series 63 ) in order to function as an agent of a broker-dealer in the state.

On August 24, 2015, the Bureau Chief (New Jersey’s securities administrator) issued an order waiving the requirement for any individual currently registered as an agent in the state.

The effect, therefore, of the new regulation is that all new applicants for registration as agents, unless otherwise exempted, will have to take and pass the Series 63 exam.

What does this mean for Kaplan? New Jersey is one of the states where a significant percentage of agents are registered in more than one state. Those in the northern part of the state generally also register in New York, and those in the southern part generally register in Pennsylvania. Both of these states have long required the Series 63 exam, so this new ruling will only impact those who are registering solely in New Jersey.

The Kaplan Series 63 exam training program has an extremely high passing rate (in excess of 95%) and is delivered almost exclusively in an on-demand video course, meaning no capital investment in instructors or meeting rooms. From a marketing standpoint, a blurb to all New Jersey client firms, as well as those in the states where the Series 63 is not yet required but who conduct business in New Jersey (currently CO, DC, FL, LA, MD, OH, PR, and VT), would make sense.

On another note, the following statement, which is contained in the waiver order, seems strange:

c. Individuals who apply to be registered as an agent who have passed the General Securities Representative Examination–Series 7 and NASAA Uniform Combined State Law Examination–Series 66 (“Series 66”) or who passed the Series 66 prior to January 1, 2000, and have been continuously registered as an agent of a broker-dealer in any state subsequent to the Series 66 passing date.

The problem with this statement is that there was no Series 66 exam prior to January 1, 2000, since that is when it was initially introduced.

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Posted by Chuck Lowenstein - March 22, 2019
Zoomed in abstract view of investment performance.

Overcoming Test Anxiety for NASAA and FINRA Exams

Most people experience some anxiety before taking a big exam; however, when worry and self-doubt start interfering with your test-taking abilities, you may be experiencing test anxiety. Trying to pass a FINRA exam is stressful enough without this added burden. Reviewing test-taking strategies, setting a study schedule and getting into a healthy routine will help you ease some of your anxiety around the test. The more you prepare yourself for the material and for the exam process in general, the less intimidating the test will be.

That said, there are a number of things you can do in your preparations to build confidence and ease your mind. These tips were put together by our expert securities instructors to overcome test anxiety.

Get Into a Study Routine Early

As soon as you have decided to take the test, get into a study routine. A steady, regular study method gives you confidence and lets the material “ripen” in your mind. Exam preparation packages can go a long way toward helping you establish good study habits. Your retention will increase dramatically with regular studying compared to a frantic push at the end. Balance your studying between the License Exam Manual and Question Bank so you don’t burn out of either. Be sure to take a day off to rest your mind when you need to. 

Get into a Good Sleep Routine

Getting a good night’s sleep before the exam is important to reducing anxiety and being at your best. Anxiety can obviously interfere with sleep, making it a vicious cycle. Getting into a good sleep routine a few weeks before the exam can help you sleep well the night before the exam. Experts recommend avoiding electronics, alcohol, and late-night eating right before bed—they can all keep you from falling or staying asleep. Figure out what works for you and stick to the routine.

Learn the Exam Process

The more you know about what to expect on the day of your FINRA exam, the fewer surprises you will encounter. This will allow you to solely focus on the exam content itself. Check out this article about what happens on the day of your FINRA exam.

Find the Testing Center

If you have not been to the testing center before, you may want to make a trial run so you know exactly where you’re going. If the testing center is inside an office building, make the extra effort to park your car and go inside to find it. This will give you confidence that you know exactly where to go on exam day.

Taking the SIE exam? Download the free eBook, A Candidate's Complete Guide to the SIE Exam, for valuable information about the test contents and the securities licensing process.

Disable the Timer Feature on Kaplan Practice Exams

If ticking time provokes your anxiety, you can disable the timer feature when you practice with Kaplan. Contact the Kaplan Student Support team at contactus@kaplan.com, and they will disable the timer feature for you.

Request Special Accommodations from FINRA

Upon a formal request for special accommodations, FINRA does offer services that include extra examination administration time and private testing rooms. Visit FINRA’s accommodations page for more information about how to apply and what accommodations are available. Be sure to complete the application process in advance. It takes 2 to 3 business days for FINRA to process your request and offer you accommodations.

On Exam Day, Get There Early

Plan to arrive at the testing center 30 minutes early. Being early means you’ll have plenty of time to check in and find where you are supposed to go. It will also give you some time to collect your thoughts before the exam starts.

Take a Break During the Exam

Plan on taking a short break during the exam and walk to the restroom to refresh. A splash of cool water and a little alone time will allow you to breathe and regather your thoughts. Ask the test center how to do it. Spending 3 to 5 minutes on a break during the middle of the exam will allow you to focus on the last half of the test and finish strong. Even the pros get a halftime!

Take Deep Breaths

A normal reaction to stress is to take shallow breaths. Therefore, to relax a bit, take a few deep breaths. Hold each breath for 3 to 5 seconds and then let it out slowly. Occasionally breathing like this during the exam will help slow your heart rate and calm your thoughts.

Take the Questions One Bite at a Time

Remember the old adage: “How do you eat an elephant?” Answer: “One bite at a time.” If, during the actual test, you consider it as an elephant, which you can eat one question at a time, you will relax. You can do a one-question exam, right? Do your best on each question as it comes up. Then move to the next...one bite at a time.

Keep Your Customers’ Best Interests in Mind

There will be questions posed to you during the exam that you have never seen before, and you should expect that. Always approach questions with your customers’ best interests in mind. It will help you sleuth out the correct answers to the questions.

Avoid Changing Answers and Second-Guessing Yourself

FINRA isn't trying to trick or fool anybody. Everything you need to answer a question correctly is always right there. Generally, when you change answers, it's because you are reading (or attempting to read) between the lines. Trust your gut and keep moving forward.

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If you are looking for exam prep help, consider a Securities Study Package from Kaplan Financial Education. Choose from our live, online, and self-study options. 

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Posted by Kaplan Financial Education - March 22, 2019
Anxious woman staring at a pile of books as she prepares to study for a securities exam

What to Expect on the Day of Your Securities Exam

So, you're on the last mile of exam prep and will be taking a securities license exam soon. Good for you! After you schedule your exam with Prometric, make sure all your hard work studying pays off by understanding what to expect on the day of the exam. This will go a long way to reducing test anxiety.

When to Arrive

Be sure to show up about 30 minutes early for your exam time. It is a good idea to map out where the testing center is and figure out how long it will take you to get there. If you arrive late for your scheduled appointment time, you may have to deduct the amount of time you were late from your test time. If you do not want to take the test at a reduced time, FINRA will charge a cancellation fee or you could be required to pay for a new enrollment to reschedule your appointment. FINRA does have a separate inclement weather policy should the weather make it unsafe to travel to the testing center.

What to Bring and What Not to Bring

At all testing centers, you will be required to show one form of valid government-issued ID containing a photo and signature. Your photo and signature will also be taken there on the spot. Depending on your testing center, you may need to provide an electronic fingerprint or digital palm scan and go through a metal detector wand test as well. They will also ask you to turn your pockets completely inside out to ensure they have been emptied of all personal belongings.

After check-in, you must put all personal items in a storage locker. For greater peace of mind, do NOT wear or bring anything valuable to the exam. Cell phones, handheld computers, and other communication devices or electronics are prohibited from being taken into a testing room or being used during bathroom breaks. Once your belongings are stored away, you will then be escorted into the testing lab with only your picture ID and locker key. The testing center will provide you with a four-function calculator, two dry-erase boards, and dry erase pens for notes and calculations and they will explain the testing protocol to you.

Taking the SIE exam? Download the free eBook, A Candidate's Complete Guide to the SIE Exam, for valuable information about the test contents and the securities licensing process.

In the Securities Exam Testing Room

There may be cameras present in the testing room. You are expected to be quiet; any suspicious signs of cheating will disqualify you from the exam. Any violation of FINRA Test Center Rules of Conduct could lead to disciplinary action by FINRA, another self-regulatory organization, or the SEC; and could even result in the candidate being banned from employment or association with any securities dealer.

There will be a computer provided in your testing cubicle. Prior to the exam, you will participate in a tutorial presentation. This presentation will explain the functions of the computer, provide a sample multiple-choice question, and give directions on how to select an answer. If you want to find out how the testing process works now, you can take the FINRA tutorial for Qualification Exams here.

Then the exam will begin!

After the Securities Licensing Exam

Once you complete the exam, your unofficial results will be displayed on the computer screen explaining whether you passed or failed. It also will provide a score profile indicating your performance on the major areas of the exam. You will also get a printout of your results from the exam center. FINRA will post your official results with the Central Registration Depository (Web CRD) or report it to your regulator within three business days following your exam.

Your exam results are final – no adjustments or special considerations will be made to your score. The exam and the exam questions are not available for review following the exam for security reasons.

If you fail the exam, there will be a waiting period before you can take the exam, per FINRA Rule 1070(e). Generally, you can retake the exam after 30 days of the previous exam. If you fail the exam three or more times in succession, you will have to wait 180 calendar days to attempt the exam again.

Have Other Questions?

Check out FINRA’s Exam Day page to learn more about what you should expect going into the exam.

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Ensure you're prepared for your next Series exam with Kaplan's securities license exam prep solutions. We have study options to suit all learning styles. Get started today. 

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Posted by Kaplan Financial Education - March 18, 2019
Man holding the door as he prepares to enter the FINRA securities licensing exam testing center

Securities Industry Careers At a Glance

Are you considering a career in the securities industry? If you are looking for more information about the profession, you are in the right place. Find out more about what the day-to-day of a securities industry professional is like, as well as the expected job growth over the next decade below. 

What Do Securities Industry Professionals Do?

Securities industry professionals typically provide a wide range of products for their clients. Typical job duties of brokers include:

  • Contact prospective clients to explain their service offerings
  • Provide financial advice on purchase or sale of certain securities
  • Buy and sell securities, like stocks and bonds
  • Monitor financial markets and the performance of individual securities
  • Report performance of securities products to clients
  • Evaluate agreement costs and revenues

Thinking about a career in securities? Download our free eBook, Launching Your Securities Career, to get tips and advice from 100+ securities professionals.

Important Skill Sets for the Securities Industry

The securities industry can be fast-paced and demanding, so it is important for securities professionals to have the following skill sets:

  • Analysis: Securities professionals must be able analyze risks and benefits of all securities options for clients quickly and effectively.
  • Sales and marketing: Securities professionals need to be able to market their skills and knowledge to potential clients, compellingly conveying how their products can benefit their clients’ long-term financial needs.
  • Emotional control: The stock market is unpredictable and all investment decisions come with risk. It is important for securities industry professionals to be able to keep their emotions, as well as their clients’ emotions, in check.
  • Relationship building: While understanding securities products is important, being able to build relationships with clients is ultimately what will make securities professionals successful. Building up a book of clients requires building trust, communicating effectively, and listening to clients.
  • Self-motivation: To succeed in the securities industry, it is imperative to take initiative, recognize opportunities, and continually follow up with prospective and current clients. There is a lot of competition in financial services and going above and beyond what is expected is the norm.

Job Outlook for Securities Industry

According to the Bureau of Labor Statistics, securities, commodities, and financial services sales agent jobs are expected to grow 6% between 2016-2026, which is about average for all occupations.

Employment growth is expected to be even stronger for commodities brokers and traders than other financial services sales agents because the market has increased in recent years because of large group investors, like retirement funds, entering the market.

How Much Do Securities Industry Professionals Make?

The median annual wage for the securities, commodities, and financial service sales industry was $63,780 in May 2017, according to the Bureau of Labor Statistics. The top 10 percent earned more than $208,000 while the lowest 10 percent earned less than $33,060.

Many brokers earn a commission based on the value of the products they sell. Most firms pay brokers a minimum salary in addition to their commissions. Trainee brokers may earn a salary until they develop a client base with the salary gradually decreasing in favor of commissions.

How to Get Started in the Securities Industry

In order to get started in the securities industry, for most securities licenses, you will need to take and pass the Securities Industry Essentials Exam, secure firm sponsorship and pass a securities “top off” licensing exam. Exam preparation packages can help you get ready for your exams.

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Looking for more information on Securities licensing and exams? Kaplan Financial Education offers securities licensing study solutions for many of the series exams. Check out our website or call 800.824.8742 for more information. 

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Posted by Kaplan Financial Education - March 18, 2019
Silhouettes of securities professionals in front of a backdrop of investment performance

How to Get Your Series 99 License

The Series 99 license, also known as the Operations Professional Exam, allows representatives to register with FINRA to offer advice or facilitate any of the following: debt or equity offerings (public or private), mergers or acquisitions, tender offers, financial restructuring, asset sales, and divestitures or corporate reorganizations.

To earn your Series 99 license, follow these steps.

Step 1: Take and Pass the SIE Exam

The SIE exam tests common topics such as fundamentals, regulatory agencies and their functions, product knowledge, and acceptable and unacceptable practices. You can take the SIE exam before being sponsored by a firm and even while you are still in school. You have a four-year window in which to take and pass any of the representative level top-off exams, like Series 99, after passing the SIE exam. Note that FINRA says that the SIE and Series 99 licenses are "corequisites," which does not mean they have to be taken at the same time. What it means is that you have to pass both exams to earn your license, and you can take them in any order.

Thinking about a career in securities? Download our free eBook, Launching Your Securities Career, to get tips and advice from 100+ securities professionals.

Step 2: Secure a Sponsorship

To take the Series 99 exam, you must be sponsored by a FINRA member firm or a self-regulatory organization (SRO). Firms apply for candidates to take the exam by filing a Uniform Application for Security Industry Registration or Transfer (Form U4). There is also an exam fee that is commonly covered by the sponsoring firm.

Step 3: Study for the Series 99 Exam

Once you secure your sponsorship, you can then take the top-off exam for the Series 99 license. Most candidates choose to take the SIE before the Series 99, but you don't have to. You can take the Series 99 exam first if you prefer.

The licensing exam is not exactly a walk in the park. You need to study with purpose and planning. To help you out, many retail brokerage firms have an in-house training program or, in some cases, they have an agreement with an external training provider. Exam preparation and review courses go a long way toward helping you pass your Series 99 exam the first time.

The Series 99 content outline is divided into two major job functions that are performed by an Operations Professional:

  • Function 1: Knowledge Associated with the Securities Industry and Broker-Dealer Operations, 35 questions, 70% of exam items
  • Function 2: Professional Conduct and Ethical Considerations, 15 questions, 30% of exam items.

The questions on the Series 99 examination emphasize tasks, such as opening and maintaining accounts. There are nine tasks associated with Function 1 and four tasks associated with Function 2. For more details on how the Series 99 is broken down, check out this article.

Step 4: Take and Pass the Series 99 Exam

Now that you've studied, it's time to take the top-off exam for the Series 99 license. The Series 99 examination has 50 questions, and the test time is 1 hour and 30 minutes (90 minutes). Currently, a score of 68 percent is required to pass the examination.

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Series 99 licensing exam prep can really give you the edge you need to pass. Learn more about our self-study options and how to purchase a Series 99 exam prep package on our website.

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Posted by Kaplan Financial Education - March 18, 2019
Series 99 securities license holder working at her desk

How to Get Your Series 79 License

The Series 79 license, also known as the Investment Banking Representative Examination (IB), allows representatives to register with FINRA to offer advice or facilitate any of the following: debt or equity offerings (public or private), mergers or acquisitions, tender offers, financial restructuring, asset sales, and divestitures or corporate reorganizations.

Prior to 2009, all Investment Banking Representatives were required to take the Series 7 exam to be a general broker. However, enough representatives were only performing investment banking activities, so the Securities and Exchange Commission (SEC) approved the Series 79 exam, which focuses on the investment banking portions of the Series 7 exam.

To earn your Series 79 license, follow these steps.

Step 1: Take and Pass the SIE Exam

The SIE exam tests common topics such as fundamentals, regulatory agencies and their functions, product knowledge, and acceptable and unacceptable practices. You can take the SIE exam before being sponsored by a firm and even while you are still in school. You have a four-year window in which to take and pass any of the representative level top-off exams, like Series 79, after passing the SIE exam. Note that FINRA calls both exams "corequisites," but that does not mean you have to take them at the same time. What FINRA means is that you have to take both the SIE and the Series 79 to earn your license, but you can take them in any order you wish.

Thinking about a career in securities? Download our free eBook, Launching Your Securities Career, to get tips and advice from 100+ securities professionals.

Step 2: Secure a Sponsorship

To take the Series 79 exam, you must be sponsored by a FINRA member firm or a self-regulatory organization (SRO). Firms apply for candidates to take the exam by filing a Uniform Application for Security Industry Registration or Transfer (Form U4). There is also an exam fee that is commonly covered by the sponsoring firm.

Step 3: Study for the Series 79 Exam

After securing your sponsorship, the next step is taking the top-off exam for the Series 79 license. Most candidates choose to take the SIE before the Series 79, but you can take the Series 79 first if you wish.

The licensing exam is not exactly a walk in the park. You need to study with purpose and planning. To help you out, many retail brokerage firms have an in-house training program or, in some cases, they have an agreement with an external training provider. Exam preparation and review courses go a long way toward helping you pass your Series 79 exam the first time.

The content outline for the Series 79 exam is divided into into three major job functions that are performed by an Investment Banking Representative:

  • Function 1: Collection, Analysis and Evaluation of Data, 37 questions, 47% of exam items
  • Function 2: Underwriting and New Financing Transactions, Types of Offerings and Registration of Securities, 20 questions, 27% of exam items
  • Function 3: Mergers and Acquisitions, Tender Offers and Financial Restructuring Transactions, 18 questions, 24% of exam items

The questions on the revised Series 79 examination emphasize tasks such as advising on or facilitating debt or equity offerings through a private placement or public offering, and advising or facilitating mergers and acquisitions, tender offers, financial restructurings, and asset sales.

Step 4: Take and Pass the Series 79 Exam

Once you’ve passed the SIE exam, studied, and secured your sponsorship, you can then take the top-off exam for the Series 79 license. The test time is 1 hour and 30 minutes and the passing score is 70 percent and above. Once you pass, you’ll be licensed.

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Series 79 licensing exam prep can really give you the edge you need to pass. Learn more about our self-study options and how to purchase a Series 79 exam prep package on our website.

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Posted by Kaplan Financial Education - March 18, 2019
Coin stacks overlayed on the backdrop of a city representing investment banking lifestyle of a Series 79 licensee.

How to Get Your Series 66 License

The Series 66 license, known as the Uniform Combined State Law Examination, is a North American Securities Administrators Association ( NASAA) exam that is administered by FINRA. It is required for individuals acting as or soliciting for the service of investment advisors or soliciting the purchase or sale of securities within a state. Getting the Series 66 license fulfills the requirements of both the Series 63 and Series 65 licenses.

In order to take the Series 66 exam, you must be a  Series 7 license holder, or be taking the Series 7 license exam concurrently with the Series 66 license exam. (If you are earning your Series 7, you will also have to pass the new SIE exam.) If you are not planning on getting the Series 7 license, then you must take the Series 65 license exam instead.

Obtaining the Series 66 license is important for representatives who provide advice on ERISA-regulated retirement accounts. 

Thinking about a career in securities? Download our free eBook, Launching Your Securities Career, to get tips and advice from 100+ securities professionals.

How to Get the Series 66 License

Unlike many FINRA Series exams, the Series 66 exam does not require an individual to be sponsored by a member firm. If you are not Form U4 registered or affiliated with a firm through FINRA’s Web CRD system, you should use the Form U10 to request and pay for the Series 66 exam. There is an exam fee that is commonly covered by the sponsoring firm if you are Form U4 registered, or by the individual if you are not sponsored.

The Series 66 exam covers four topic areas:

  • Economic Factors and Business Information
  • Investment Vehicle Characteristics
  • Client Investment Recommendations and Strategies
  • Laws, Regulations, and Guidelines, including Prohibition on Unethical Business Practices

The Series 66 exam contains 100 multiple-choice questions that must be completed in 150 minutes. You must get a 73/100 or higher to pass.

In July 2016, NASAA added new content to the exam to better reflect the skills and knowledge required for dually registered agents of broker dealers and investment adviser representatives. Some content areas were renamed, combined, or reorganized. For example, the alternative investments area was expanded to include additional investment types and given changing market conditions. The content was also expanded regarding client type, ownership, and estate planning techniques. A content area was added to incorporate new topics such as social media, cybersecurity and data protection, anti-money laundering, and custody obligations.

While the length of the exam did not change, the passing score did change to 73%. The weighting of the topics and number of questions in each topic area were also updated to better reflect the importance of certain knowledge and skills. Check NASAA’s website for the most up-to-date content outline for the Series 66 exam.

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Are you ready to enroll in Series 66 licensing exam prep? Check out our website to learn more about our live and online study options, and to purchase a Series 66 exam prep package.

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Posted by Kaplan Financial Education - March 18, 2019
Magnifying glass focusing on investment performance as is required by Series 66 license holders

How to Get Your Series 63 License

The Series 63 exam, known as the Uniform Agent State Law Examination, qualifies individuals as securities agents. The Series 63 exam, developed by NASAA in cooperation with representatives of the securities industry and administered by FINRA, covers principles of state securities regulations.

The Series 63 license is intended to measure an applicant’s knowledge and understanding of state law and regulations. It is required for individuals soliciting the purchase or sale of securities products, such as mutual funds, variable annuities, stocks, or bonds within a state. To sell securities, an agent must have both the Series 63 license and the Series 7 license (General Securities Representative), or the Series 6 (Investment Company Products/Variable Contracts Limited Representative). To earn the Series 6, Series 7, or both, you must also pass the new SIE exam.

Thinking about a career in securities? Download our free eBook, Launching Your Securities Career, to get tips and advice from 100+ securities professionals.

How to Get the Series 63 License

Unlike many other FINRA exams, the Series 63 exam does not require member firm sponsorship. If you are not Form U4 registered or affiliated with a firm through FINRA’s Web CRD system, you should use the Form U10 to request and pay the $125 fee for the Series 63 exam.

The 75-minute exam consists of 65 multiple-choice questions, 60 of which will count toward your final score. The remaining 5 questions are being pre-tested for possible inclusion in the official question bank. These questions will appear anywhere in the exam and are not identified. To pass the Series 63 exam, you must answer 43 of the 60 scored questions correctly, or achieve a score of just over 71%.

The exam covers two topic areas:

  • State Securities Acts and related rules and regulations
  • Ethical practices and fiduciary obligations

In July 2016, NASAA updated the curriculum for the Series 63, 65, and 66 exams. Changes to the Series 63 exam better reflect the skills and knowledge needed to be an agent of a broker dealer. This means that investment adviser and investment adviser regulation content was de-emphasized for more focus on definitional concepts. A few additional topics were added to the exam, such as advertising and correspondence (including social media), and cybersecurity and data protection.

The number of questions and the passing score for the Series 63 exam were not changed; however, the weighting of the exam and number of questions in each topic area were adjusted to better reflect the importance of certain knowledge and skills.

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Ready to get your Series 63 license? Browse our website to learn more about our live and online study options, and to purchase a Series 63 exam prep package

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Posted by Kaplan Financial Education - March 18, 2019
Image of governemnt building representing focus of Series 63 on state laws and regulations

How to Land Your First Client (That Isn't Your Mom)

You set up all the paperwork. You registered your business and ensured everything was compliant. You bought all the hardware you needed to run your own RIA smoothly, and your financial planning software and tools are standing by, ready to accept your first clients.

You powered up your new laptop, made the final approval on your website, and launched it into the world. Maybe you even sent out your first social media post or email newsletter to make the big announcement: your financial planning firm is officially up and running, and the doors are open to new clients!

But you soon realize...the only person reading your blog posts is your mom, and your significant other is the only person dutifully liking all those posts on your firm’s Facebook page.

Relax: Getting Your First Clients Takes Time

Before you panic, know that hearing crickets in the first days after you launch is completely normal. You may even have a few prospect calls set up, but no one bites. It takes a lot of legwork to sign up that very first person (and to start building a pipeline of potential clients). But if panicking isn’t an option, then what should you do instead?

 First, look at this as a positive. When you first launch your business, you may not have much cash flow or revenue. But what you do have is time. And if you can invest your time into the following strategies, you’ll start bringing on your first real clients soon.

Connect with Other Advisors

Established advisors aren’t necessarily your competition. They can be your collaborators if you work to build mutually-beneficial relationships with them. Look up advisors in your area and call on those you already know. They likely receive prospective clients that, for one reason or another, aren’t a good fit for their firm. You could become the perfect referral for those prospective clients who don’t fit into another advisor’s plans.

By connecting with other advisors, and providing them a place to send clients they can’t or don’t want to work with, you are also doing them a favor. No one likes to turn people away. Now, those advisors can provide a good recommendation for that prospect while also helping you to build your own pipeline of potential clients.

Network with Local Business Owners

In addition to connecting with advisors, look at business and entrepreneurial groups in your area that you can join. These could include organizations like:

  •  BNI
  • Your town or city’s chamber of commerce
  • Rotary International
  • LeTip
  • Your college alumni services or groups (if you’re still in the area)

You can also run a Google search for “local networking groups” if your location services are turned on; Google will return results for your area if so. Look for niche groups as well, and search by specific keywords (e.g., “business women in [your area]”). If you don’t live in a big city, that’s okay. There are groups on Facebook and LinkedIn that you can become a part of and contribute to for the nearest metropolitan hub.

When integrating into an online group (or an in-person one, for that matter), a good strategy is to seek to add value first...and to contribute over and over again before you ever make an ask yourself.

In the meantime, if someone in the group specifically asks for a financial planner, you can speak up and perhaps share a link to your website. You don’t need to be pushy or salesy. Just provide your information and throw out an invite to contact you if they have any questions.

Once you’re integrated into the group, you can start making specific asks or promoting yourself in a more direct way. Perhaps you can share an event you want to host, or share links and articles you’ve written that are relevant and helpful to the group. Through networking in these communities, both online and offline, you can slowly build a referral system that thinks of you when they hear someone needs a financial planner.

Tap Your Existing Networks

No, you don’t want just your mom as a client—but maybe your mom, or your cousins, or your friends, or other people you already know personally and professionally, know people who would be perfect clients for you.

They can’t make referrals to you unless they clearly understand what you do, who you do it for, and why. Here are a few ways to educate them:  

  • Reach out directly and personally. Have a one-on-one conversation to talk about your business, your goals, and the kind of people with which you want to work. Provide a business card for them to hang on to in case they think of someone who might be interested in your services.
  • Send out one email through a system like MailChimp. Make it short and sweet—share that your business is taking on new clients. Briefly describe the kind of person you want to work with, and conclude by thanking them for their time and help. Give them the option to be removed from future emails like this.
  • Stay top of mind going forward by occasionally sharing your business social media updates on your personal networks, or by sending out a periodic email to say hello. Do not send emails to those who asked not to receive them, and try to avoid sending out impersonal mass emails.

In all these cases, you want to be open and honest, but not pushy. These are your friends, former coworkers, and family. Once they’re aware of what you do, you don’t need to bug them every other day with a Facebook message.

Attend Local Events for Businesses and Professionals

There’s something to be said for just being present and showing up when you get the chance to do so. Look for local professional events, conferences, and other happenings around town that can give you the opportunity to meet new people. You may not go to an event and score a client directly, but over time, your attendance can help you build a name for yourself along with a good reputation. This can expand your own network and provide more opportunities to gain clients down the road.

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There’s rarely one silver bullet to landing clients. In other words, no one action or approach is likely to yield a stream of clients. Instead, build up your book of business over time and through several different activities. Establish your authority and credibility, both online and in person in your local area.

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Posted by Kaplan Financial Education - February 5, 2019
Investment advisor signing her first client

How to Start Your Own RIA Financial Practice

Do you want to start your own RIA and financial planning practice? It’s an excellent time to start out on your own in the industry. The majority of established advisors with existing RIAs are eyeing retirement, and there’s an influx of new, younger clients who want specialized service from the next generation of financial planners. Not to mention, new business models within the industry provide you with more options to create your own practice that you run your own way.

There’s a lot to think about and consider if you want to launch your own RIA, as well as plenty of details to get lost in. But to give you a high-level (and less overwhelming) overview, start with the biggest questions to answer and issues to address if you want to start your own financial planning firm.

Nail the Basics of Your Business Plan

You don’t need a 50-page plan in order to start your own practice. But you should consider how your business will operate in the real world before you jump into this big venture. You should be able to answer the following questions before moving forward with additional logistics and processes required to start your own RIA:

  • What problem are you seeking to solve?
  • What solution do you provide, and to whom?
  • What makes you different from other financial planning firms?
  • What kind of costs will it take to run your business?
  • What will you do to earn revenue, and how much do you need to earn for the business to be viable?
  • What challenges do you expect to overcome? You don’t necessarily need all the answers right now, but you should anticipate where you may run into trouble and consider a plan for avoiding potential pitfalls.

Consider Who You Want to Serve

You can start your own RIA with the end goal in mind: the clients you one day want to serve. If you open your firm without any idea who your services are for, you may lack clarity and focus.

A purely assets under management model, for example, may not work if your goal is to work with people under 50 who are in the middle of their careers and still working to build wealth. Your target client isn’t in a position to give you 1% of their small nest egg...and 1% of their assets won’t be profitable for you, either.

On the other hand, maybe you’re interested in working with clients who do have assets and want help with more complicated investment strategies. In this case, it makes little sense for you to charge them on an hourly basis. Your expertise is likely worth more than what clients will be willing to pay when the rate is positioned as a per-hour fee.

Choose your ideal client, consider their needs, think about what services you could provide for them, and figure out what they can both afford to pay and what they’re willing to pay. From there, you can choose a business model and pick the tools you need to deliver services in a way that makes sense for the particular client you want to work with. Don't forget to think about how you'll get referrals.

Determine Your Business and Revenue Model

There are three primary fee structures for RIAs:

  • Assets under management (AUM): You charge a percentage of the clients’ assets that you manage for them. Financial planning services are often provided for free as an “add-on,” and investment management is the main focus.
  • Hourly or project-based: You charge according to how much time you spend with each client and bill them for the hours you dedicate to working with them.
  • Subscription: You charge a flat monthly fee in exchange for a defined scope of work delivered to the client. RIAs who charge on a subscription basis often focus on financial planning as the main service the client pays for. Many provide investment management as well, as a separate service with an AUM model fee.

There are pros and cons to each structure. Again, the right one for you will ultimately depend on the type of client you want to serve.

Get Through the Red Tape and Set Up Compliance

Compliance is one of the most complicated things you’ll deal with in creating your own RIA. Before you jump into that challenge, make sure you have:

  • A company name.
  • A decision on how you’ll run your company: will you be a sole proprietor, LLC, or corporation? Make sure you file appropriately depending on which path you want to take.
  • A business checking account.
  • A way to protect yourself and your business, like E&O insurance.

Next, you need a way to file the paperwork required to establish your RIA. You can do this one your own. But compliance is convoluted and can severely impact your business if you don’t follow the regulations and requirements, so consider hiring an RIA compliance company to work with you. They’ll help you create and file the required documents you need to be a legitimate financial planning firm. Use a company like CS2 Compliance, or Financial Planners Assistance to ensure this is done right the first time.

Will You Practice Virtually or Keep Office Space?

Today’s business models and client expectations, along with options for working virtually, make it simple and easy to start a virtual RIA. This means you don’t necessarily need to buy or rent physical office space. This helps a young RIA save on costs, as there’s no need for office furniture, a store of traditional office supplies, or additional bills like utilities for a new space.

You can meet with clients virtually through tools like Skype or Google Hangouts. You could meet clients in their homes, or even invite them to your own home if you have a comfortable home office space with enough room for clients to meet you there.

Another option is to rent office space as you need it through a company like Regus. You could also connect with your network and rent conference rooms or extra space for meetings from other professionals with established offices.

If you’re set on office space, consider renting from coworking spaces to make it easier to get started. These are cheaper alternatives to traditional standalone offices, and might be more financially feasible for your business as you launch. Many of these setups provide you with shared desk space with other members, but can provide access to private conference or meeting rooms as needed.

Choose Your Software and Tools

There are endless services and products you can buy or subscribe to that you need to run your RIA. Every firm's technology suite and back office tools will look a little different, but your practice needs solutions for basic software and hardware to run the business. Here’s the hardware to consider implementing to get you started (and we’ll assume you’re running lean or completely virtually, for the purposes of this article):

  • Computer and a way to backup your devices and files along with a means to keep everything secure
  • Scanner
  • Cell phone
  • PO box or UPS mailbox

For software, you’ll want to look into things like:

  • Video meeting tools, like Skype, Google Hangouts, or Zoom.
  • Cloud-based document storage, like Google Drive or Dropbox.
  • A client relationship manager (CRM). Hubspot offers a free CRM, or you can use an industry-specific tool like Wealthbox.
  • Online scheduling system, like ScheduleOnce or Calendly.
  • A way to electronically sign documents, like Docusign or Hellosign.
  • A bookkeeping software and a payment processing system.
  • Achieving for your website, social media, and emails to stay compliant.
  • Financial planning software to help you better serve clients.

Finally, you will need an online presence, which will require:

  • A website itself (you can use a pre-built theme from a place like ThemeForest or hire a designer to create a customer site)
  • Web hosting
  • A domain name
  • A content management system (CMS) like WordPress
  • Email servers
  • Social media strategy

There is certainly a lot to think about, but these are the fundamental areas you need to look into and create plans for if you want to start your own RIA. Once you have these pillars in place, you can start adding more details and getting specific with exactly how you’ll establish, run, and grow your own financial planning practice. 

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Posted by Taylor J. Kovar, CEO of Kovar Capital - January 18, 2019
Securities professionals starting their own RIA firm

The Good, the Bad, and the Ugly of Being Your Own Boss

Ever dreamed of starting an RIA because it meant you could finally run your own firm, your own way? Building your own business means a lot of freedom and flexibility. That freedom to create what you want applies not only to when and how you work, but also to who you work with, the services you offer, and the values you want to follow while serving your clients. There’s plenty of promise in the opportunity to live the life you want while teaching your clients to do the same. But being your own boss and running your own financial planning firm isn’t all sunshine and rainbows

You already know it takes a lot of hard work and long hours. It’s a big commitment, and you may need to hustle for months—even years—before you start seeing results. But there are other sides to being your own boss that you may not have thought about yet, including facing failure, realizing you need to change course, and facing the loneliness many experience when striking out on their own.

Entrepreneurship presents an amazing opportunity to be your own boss, sell solutions your way, and create something new in the industry. It’s a great path, but you should be aware of the potential pitfalls along the way before diving in headfirst. Consider the good, the bad, and even the ugly of running your own show as a new RIA owner.

The Good: You Get Full Ownership of Everything

There is no more senior advisor pushing you around and telling you how to do your job...no more firm owner failing to recognize your brilliance and not letting you implement your innovative planning ideas. You’re on your own, baby!

This is your opportunity to build the business as you think it should look and run. You get to design everything, from the back office setup to the client experience and planning process. You choose your ideal target market, the clients you accept to work with, and the services you deliver to them. You get to make the decisions and create everything from scratch, as you believe it should be. All the decisions, big and small, come down to you.

The Bad: You Get Full Ownership of Everything

This is a double-edged sword for financial planning firm owners, because all the decisions, big and small, come down to you. There’s no one else who is going to tell you what to do. In contrast, there’s also no one else to blame when things go wrong or you make a mistake. All the decisions come down to you...and so does all the responsibility.

That can feel overwhelming and scary, but you don’t need to work in a vacuum. When you work as your own boss, you need to look for different kinds of support systems and guidance, including things like:

  • Joining professional associations or communities of fellow business owners.
  • Creating or joining a mastermind group.
  • Getting a business mentor to provide guidance.
  • Hiring a business coach to help give you advice.
  • Brushing up on marketing techniques, such as referral marketing and social media.

The Ugly: The Challenges Included in Scaling Up

Of course, you probably won’t be on your own forever. If your firm succeeds, you’ll reach a point where you need to make hires to help you. The tough part is making the leap to bringing on help for the first time. You’ll likely run into this “chicken and the egg” scenario: you need to hire help in order to manage your workload and continue to grow…but you also don’t feel like you have quite enough revenue to make a hire yet. It’s easy to get stuck in this trap. After all, you’ve spent all of your time up until this point growing your revenue and becoming profitable; to take a step back in what you net may feel like an impossibility.

Plus, there are other challenges to address. Before, when it was just you, you didn’t have to teach anyone how to perform tasks. So you may not have built systems or processes yet—both of which are critical if you want to build a team of more than just one. Not to mention, as the boss, you’re the one responsible for finding and hiring the right person to help you. And you bear the responsibility if you don’t make a good hire.

Needless to say, figuring out how to scale your business when acting as your own boss can get ugly fast. One potential solution is to start small with baby steps: hire a part-time paraplanner instead of a full-time employee. Or work with contractors to outsource specialized tasks to buy some of your time back while still growing your revenue.

The Good: You Enjoy Freedom in When and Where You Work

The idea of “location independence” has become extremely popular in the last few years, and for good reason. It means you’re not locked into an office and can work when and where you want. For financial planners, this is a big benefit to clients as well. When you can work virtually anywhere and anytime, that gives them the flexibility to meet with you anywhere, anytime.

This is great for families who move often—you can still be their financial planner even if they move across the country, because you’re already setting your own meeting schedule and can use video chats to conduct meetings. The same applies to freelancers or other business owners who choose to be their own bosses. It gives them the freedom and flexibility to choose their own hours and work locations. This doesn’t mean you have to work virtually or untraditional hours. It just means it’s your choice, and that’s one of the best parts of being your own boss!

Do you want to set up a small office and serve your local community? Do you want to work weekends so you can enjoy quiet Mondays and Tuesdays at home? Prefer to run a virtual practice and do the bulk of your work at night once your afternoon and client meetings wrap up? Or do you like to work early in the morning and free up your afternoons? These are the choices you can make...so go for it!

The Bad: No Work, No Money

One of the tradeoffs for all the freedom and flexibility in your time and location is that as your own boss, there are no vacation days or paid time off. When you start your own RIA, and it’s just you, your business doesn’t work unless you do.

For the first year or two, you may not think too much of that. Your business is like your new baby, and you’re happy to pour your time and energy into it. In fact, many new entrepreneurs feel like work becomes more of a hobby. It is different than sitting at your desk in someone else’s office, working in someone else’s business. But when you start getting into year 3 or 4 of no vacations, no sick days, no “playing hooky” days…that “freedom” can start looking a whole lot more like a ball and chain.

The Ugly: It’s Lonely Out There When It’s Just You and Your Business

As your own boss, who is responsible for everything, you carry a heavy burden. And you may look around and see that there’s no one else around to help you. This is especially true if you seek to start a new or novel type of business. If you’re a pioneer in your field, you lead the way and the rest follow. But as they say, it’s lonely at the top.

You might miss out on the normal networks and connections you relied on as an employee with bosses and coworkers. You no longer work for a company that might provide access to events, professional development, and more.

You may literally be alone during your workdays before you hire someone to help you (and this is especially true if you work virtually). The loneliness can seep into your personal life, too, if your business requires a lot of your time and energy. You may struggle to make room for your family, friends, social activities, and time away from work.

Determine if Your Good Outweighs the Potentially Bad and Ugly

Nothing in this article is meant to discourage or dissuade you from starting an RIA on your own. But it is important to understand the realities of being your own boss. It might help to write out a simple pros and cons list to help you gain clarity on the good and the bad (or just downright ugly). Here’s what this might look like:

PROSCONS
Ability to build something on my ownResponsibility for being my own boss and running my own firm                                                                                     
Opportunity to create a lasting income stream that, one day, could be sustained without my direct involvementPotential for failures, from small and occasional to systematic
Potential to sell the business down the road (potential asset)Increased costs and expenses
Can provide the services I want to and work with just the clients I want to work withNo real ability to take time off or away from the business
Can create everything exactly how I want it and choose to give myself (and my clients) options, such as working virtuallyNo built-in support network or system; I have to build it myself or go without
Can set my own schedule and control my time more than I can as an employeeNeed to face a number of challenges I don’t have to deal with as an employee
My business has the potential to support my life (instead of having to try to fit my life around my job)Hard to “leave work at work”; if I don’t work, revenue stops flowing

 

If you decide the potential pitfalls that come with firm ownership are worth it, and you’re willing to deal with them as they come up, go for it. The same determination and dedication that led you to open your financial planning practice will serve as an asset when you deal with any problems or challenges you face along the way. You can certainly succeed as your own boss!

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Posted by Taylor Kovar, CEO of Kovar Capital - November 8, 2018
Woman running her business sitting at a laptop computer

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