Posted by: Kaplan Financial Education
Updated: November 1, 2018
The Securities Industry Essentials (SIE) exam is a new qualifications exam administered by FINRA. The exam tests basic information including products, risks, the structure and function of the securities industry and its regulatory agencies, and knowledge of regulated and prohibited practices.
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.
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 Markets||12 of 75 questions||16% of the test|
|Function 2: Understanding Financial Products and their Risks||33 of 75 questions||44% of the test|
|Function 3: Understanding Trading, Customer Accounts, and Prohibited Activities||23 of 75 questions||31% of the test|
|Function 4: Overview of Regulatory Framework||7 of 75 questions||9% 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.
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.
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.