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SIE Exam and Representative-Level Qualifications Proposal: Member Comments

Securities Industry Essentials (SIE) Exam & Representative-Level Qualifications Proposal: Member Comments

Posted By: Mark Sanchirico
Updated: October 12, 2017 

UPDATE 10/12/17: An effective date for the new Securities Industry Essentials (SIE) Exam has been announced. Read more here

FINRA’s “request for comments” period regarding the proposal to restructure the current representative-level qualification examination program ended in late July. While comments from members were generally favorable, some did express concerns.

Here is a brief review of the proposal. FINRA proposes to restructure the current representative-level qualification examination program into a format whereby all potential representative-level registrants would take a general knowledge examination and an appropriate specialized knowledge examination to reflect their particular registered role. The general knowledge examination will be called the Securities Industry Essentials Exam (SIE). SIE content would include knowledge fundamental to working in the securities industry, such as basic product knowledge and other areas common to current representative level licensing exams. Of note, and different from current licensing, individuals taking the SIE would not need to be associated with a FINRA member firm. A passing result on the SIE would be valid for four years, during which time a candidate could associate with a member and be eligible to take one of the specialized knowledge examinations. Each specialized knowledge examination would correlate to a current representative examination and registration position (e.g., Series 7, Series 6) and would test content specific to that registration category or job function.

Among the favorable endorsements, members complimented FINRA on taking a much needed effort to streamline the process for individuals and provide a sensible approach to licensing. Making the securities industry more accessible to individuals and the likelihood that interest in the student community would develop was noted repeatedly. Eliminating redundancies among the current representative-level examinations was also a recurring comment among members. Most had no issues with eliminating some of the existing licensing exams as proposed. Some members encouraged FINRA to take a further step and extend the new format proposal to principal-level examination qualifications as well.

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.

A number of member comments included content suggestions regarding the proposed SIE exam content outline. As can be imagined, these were specific and varied and had much to do with individual member business concentrations. For example, among the suggestions were the following:

  • Have the Market Structure section include a discussion of other market participants, such as investment advisers, private equity managers, and municipal advisers to ensure that knowing where lines of jurisdiction are drawn becomes a part of a registered representative’s fundamental knowledge.
  • Include communications with the public in the outline and ensure that it is taken to the depth of including the categories of communications, electronic communications, and advertising.
  • Cover quantitative concepts like the time value of money, because its understanding can play a key role in helping make financial decisions, such as saving and borrowing.

While some members encouraged FINRA to include specific content areas in the SIE outline, others felt the detailed rules and regulations that are included in the draft SIE outline are more appropriate for the specialized examinations. In addition, some suggested that better placement in the representative-level exams might be considered for certain content items. Examples of such items included account types, types of customer account registrations, account statements, confirmations, and transaction settlement.

Concerns and oppositions, while fewer than endorsements of the proposal, ran broadly across repetitive themes. Allowing an individual who is not otherwise employed by a member firm to take the examination raised expected concerns having to do with investor protection. Included in the comments, it was noted that the Rules of Conduct do not yet address restrictions on how an individual might hold him or herself out to the public after passing the SIE examination. Many members reminded FINRA that despite efforts to promote understanding, investors are routinely confused about broker-dealers and investment advisers. With the SIE adding yet another implied credential to the mix, it could become a source of confusion and allow the opportunity for misrepresentations to the public. Member firms encouraged FINRA, possibly through the adoption of new rules, to take all efforts to make clear that persons not associated with a member firm, who have passed the SIE, are prohibited from holding themselves out to the public as having passed the examination.

The potential lack of balancing in time, effort, and cost of the new proposal to roughly equal the current licensing program for candidates also proved troubling to some members. While the SIE is proposed to contain 75–100 questions, the number of questions for the specific specialized knowledge examinations has not yet been determined. For example, a Series 6 candidate, currently needing to study for and take a 100-question licensing exam, might now be required to take twice that number in the SIE and Series 6 specialized knowledge exam combined. Members encouraged FINRA to finalize specialized knowledge examination outlines and consider the cost in time and effort required to be licensed.

The tangible fees to sit for exams were not left unaddressed among member concerns. Whether absorbed by an individual or a member firm, it was recommended that, to the extent practicable, the pricing for the restructured licensing procedure not exceed the current examination fees. It was noted by several members who commented that a high fee for the SIE exam may have the unintended consequence of making securities industry employment cost-prohibitive for some interested and capable individuals. And in that regard, though the intent is accessibility for all, the SIE could unintentionally institute a gatekeeper approach to the industry and ultimately limit accessibility.

Finally, a few members had concern with the lack of a definitive roll-out plan. While exact timing and implementation details have yet to be revealed by FINRA, Kaplan intends to be ready with study materials for the SIE, as well as the Series 6 and 7 specialized knowledge exams in time for the earliest proposed 3rd quarter, 2016 implementation.

A Candidate's Complete Guide to the New SIE Exam Free eBook - Kaplan Financial EducationA Candidate's Complete Guide to the New SIE Exam

After identifying nine series exams with common content (6, 7, 22, 57, 79, 82, 86/87, 99), FINRA has decided to restructure their licensing process next year. The common content will be tested in the new Securities Industry Essentials (SIE) exam. Download this free guide to learn more about how the new securities licensing process will work, the rationale for the change, proposed SIE exam content, and how it could change hiring and recruiting practices.

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