In late 2017 FINRA provided notice of a series of changes to be made to the Qualification and Registration rules. On October 1, 2018 those changes became effective. One of the most interesting changes, for no other reason than that it concerns the creation of a new level of qualification and hence a new test, is the Securities Industry Essentials or SIE examination.
Concurrent with the creation of the SIE FINRA distilled the then existing representative-level exams into more specific sub level examinations. You could view this change as requiring of the test taker a more vertical, deeper knowledge or the exam subject matter rather than the horizontal, broader understanding that was previously required, for lack of better phrases.
The minimum of what you should be clear about…
Individuals seeking to register after October 1, 2018 will be required to pass the SIE.
In addition, such individuals shall remain required to take the specific subject matter tests as always, but many of those tests, like the popular Series 7 (General Securities Representative) examination, for example, have been revised.
To be clear, if this is your first rodeo you’ll be required to pass both the SIE and one of the revised representative-level examinations.
Some former registered representatives and all current registered representatives will be considered to have passed the SIE. That is, they will be grandfathered in and not required to sit for the SIE.
There is still a license examination waiver process, which includes the SIE.
FINRA posits that the creation of the SIE should remove redundant testing of more general securities knowledge. I may be misinterpreting that sentiment, but in the past you studied and sat for a single exam containing both general and specific knowledge. Now, you will study and sit for two exams containing general and specific knowledge, respectively. Not something to dwell on, but I’m not catching where the time saving is taking place, but it’s too early to make judgements. We’ll see.
FINRA is eliminating several representative-level registration categories and their exams. Happily, those individuals already maintaining the eliminated representative level licenses will be grandfathered.
The following representative-level registrations are sticking around:
Investment Company and Variable Contracts Products Representative;
General Securities Representative;
Direct Participation Programs Representative;
Investment Banking Representative;
Private Securities Offerings Representative;
Research Analyst; and
The Series 62, which was a representative-level exam respecting corporate debt and equity is no more. I find this one interesting in that I used to suggest this license, as opposed to the more comprehensive Series 7, to individuals who were to conduct solely a private placement business. I did this because I am aware of at least one state that does not recognize the Series 82, which is the Private Securities Offerings Representative license mentioned above. I am in the process of better understanding how this state will react to these changes and whether it will soon recognize the S82, or require a registered individual to study and sit for a licensing exam covering more subject matter than is relevant to such individuals intended job functions. I’ll post something on this as soon as I know more.
As has always been the case, the representative- and principal-level registrations will lapse after a two-year period where the registered person is not registered. The new SIE is allows for a four-year period before it disappears.
This is neat. Individuals solely discharging “clerical or ministerial” duties, as well as members of the general public, can study and take the SIE without having to first be associated with a broker-dealer firm. I like that. FINRA is creating a system similar to its CRD system where these individuals can enroll and pay their fee.
If you want to drill down further (and there is a lot here to understand) I can assist. I’d be happy to chat.
I hope I have provided you with a little clarity today.
Before you go…
My Clarity Concepts Blog posts are intentionally short and provided whenever I find a pattern of confusion or a simple lack of clarity among some of my own clients or that I see more generally occurring in the larger financial services world. They are not written as a treatise on the subject, but simply to provide some clarity.
The information in this article and/or blog is for informational purposes only and not for the purpose of providing legal advice.