Can’t Help but Dwell:
My apologies for beating the dead horse that comprises some of the less noticeable points contained in FINRA’s still recent (in the scheme of major rule changes) revision of the licensing schemata of October 2018. This post is short and sweet. Let’s discuss Permissive Registrations, shall we? But first, in case you’ve missed the more noticeable points of the recent change here’s a very brief and painless recap:
Just the Highlights:
You’ll recall the more popular changes, such as FINRA member broker-dealers now being required to designate a Principal Financial Officer (“PFO”) and a Principal Operations Officer (“POO”). Too, there’s the new Securities Industry Essentials examination (“SIE”), which is open to the general public and can be taken by your Uncle if he wishes to expand his horizons and prime himself for a career change.
If you’re a little more serious about a career in the broker-dealer industry, then registering at a broker-dealer for the first time will require that you pass both the SIE and one of the newly revised representative-level examinations. If you’re coming back for another round, and depending on how long you’ve been away, you may be considered to have passed the SIE. That is, you’ll be grandfathered in and not required to sit for the SIE. If you’ve never left, you’re most likely safe as well.
To be clear, permissive registrations are not new, but the recent rule changes have at once practically, conceptually and significantly expanded the current categories of permissive registrations. FINRA has provided a few startling examples, in my opinion, epitomizing the breadth of the expansion. Such as: An individual working in a broker-dealer’s IT department can maintain a representative’s sales license with that firm. That’s a departure from the previous proscription. And: An individual currently having a representative level sales license could maintain a principal’s license.
The implication here is that our IT guy/gal and sales rep do not have to discharge duties or responsibilities with regard to their newly acquired sales and principal licenses, respectively. In the “old days” that would be considered a “Parking” violation.
It is important to note that “rules that have general application to the conduct of all associated persons, or all registered persons, would also apply to the conduct of permissively-registered individuals.”(1) Don’t forget. Individuals maintaining permissive registrations will be subject to the Regulatory Element of Continuing Education.
Simply, the idea that should not be lost on anyone is that everyone wishing to dip a toe into the waters of a career in the broker-dealer industry can do so via the Securities Industry Essentials examination, which is open to the public, before taking the plunge into full association as either an employee or independent contractor. Within broker-dealer firms themselves, permissive registration allows individuals normally not required to hold securities licenses notwithstanding a legitimate affiliation with the firm, to expand their horizon and their knowledge thru the study and testing process. When you work in a highly regulated industry such as ours even a little knowledge is never a bad thing, but a whole lot of knowledge is always a good thing. Permissive registrations make getting smarter easier – and without the potential burden of acting in such a capacity prematurely.
Please Don’t do This:
Unless you’re driving in Manhattan, Parking has not gone away, and neither has the Parking Violation. Be aware that Permissive Registrations apply to persons that must first be associated in some legitimate (i.e. real) role at the broker-dealer firm. Otherwise, if you have no prior legitimate role at a broker-dealer firm and you register a securities license there with no intention of acting in the role that requires that license, you’ve most likely just parked that license.
Before You Go…
My posts are intentionally short and provided whenever I find 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 clarity. I hope you found this post helpful.
(1): See FINRA Regulatory Notice 17-30
Gregory Levine, Gregory Levine Law, 11 Broadway, Suite 615, New York, NY 10004
Direct Line: 1 646-783-1250, www.gregorylevinelaw.com