Qualifications & Examinations

Broker-Dealer Registrations

Registration of the entity is another Standard for Admission that should be handled early in the process. Registration with FINRA requires proof of approval by the U.S. Securities and Exchange Commission (SEC) and other regulatory bodies as appropriate (e.g., Municipal Securities Rulemaking Board (MSRB) for firms planning to sell municipal securities).

 

SEC Registration

As a condition for FINRA membership, an Applicant must first be registered as a broker-dealer with the SEC. FINRA uses the Central Registration Depository (CRD® ) system to process membership applications. If the Applicant checks the SEC registration box on the Form BD, FINRA will automatically notify the SEC of the membership application. To obtain specific information regarding SEC registration, contact:

 

Branch of Registration and Examinations
U.S. Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549
(202) 551-7250

 

State Registration

Applicants are also subject to the requirements of the securities laws and registration requirements of any and all states where it conducts a securities business. Most state securities agencies use the CRD system for processing the initial Form BD and broker-dealer fees. If the Applicant checks the state(s) with which it intends to register on the Form BD, FINRA automatically notifies the state(s) of the Applicant's membership application. However, many state regulatory agencies require that Applicants provide additional documentation and information directly to their offices to fulfill their application requirements. Individual state regulatory agencies can help with their specific requirements. A list of state agencies is available on the North American Securities Administrators Association (NASAA) Web site or by calling (301) 590-6500.

 

SIPC Registration

All non-bank broker-dealers registered with the SEC that conduct their principal business within the United States, its territories or possessions must become members of the Securities Investor Protection Corporation (SIPC). Exempted from the SIPC requirement are Applicants that exclusively sell mutual fund shares, variable annuities, insurance and government securities, or furnish investment advice to investment companies or insurance companies. Broker-dealers may request SIPC membership materials when registration with FINRA becomes effective. SIPC information is available from:

Securities Investor Protection Corporation
Membership Department
805 15th Street, NW, Suite 800
Washington, DC 20005
(202) 371-8300

 

Securities Information Center Registration

SEC Rule 17f-1 requires all Applicants to register as direct or indirect inquirers in the Securities Information Center's Lost and Stolen Securities Program unless the Applicant is exempt from registration. To find out about possible exemption status, please contact FINRA's MAP Program Group at (212) 858-4000 (press 5 when automated message begins). A broker-dealer may become an indirect inquirer through its clearing firm. Broker-dealers may request materials upon registering with FINRA. Direct all requests for forms and information about the Program to:

 

Securities Information Center
P.O. Box 52080
Boston, MA 02205-2080
Toll Free No.:  (877) 300-2578
Local No.:  (408) 352-9224

 

MSRB Registration

All broker-dealers that will offer and sell municipal securities also will need to register with MSRB. To obtain information on MSRB Rules, regulations and filing requirements, contact:

 

Municipal Securities Rulemaking Board
1900 Duke Street, Suite 600
Alexandria, VA 22314
(703) 797-6600

 

Branch Office Registration

The FINRA By-Laws, Article IV, Section 8 , require registration of each of the Applicant's branch offices. FINRA's website on Branch Office Registration contains information and guidance on the branch office definition.

NASD Rule 3010(a)(3) requires a designation of Office of Supervisory Jurisdiction (OSJ) for certain locations. The number of OSJs an Applicant must maintain will depend on the nature and scope of the Applicant's business and the activities to be conducted at the proposed branches. An OSJ must have at least one qualified and registered principal who functions as the individual directly responsible for performing the supervisory duties associated with the OSJ. The main office of each member firm is always considered an OSJ and, as such, maintains supervisory jurisdiction and responsibility over all other branch offices not designated as an OSJ.

 

Individual Qualification and Registration

The FINRA qualification and registration requirements are set forth in the FINRA By-Laws in Articles III and V and in the NASD Rule 1010, 1020 and 1030 Series. These requirements specify which persons associated with the member must register with FINRA and which are exempt from registration. The required registration category is based on the type of business engaged in by the broker-dealer, the securities products handled by the individual, and the capacity in which the individual functions.

FINRA prescribes two levels of qualification and registration:

 

  • Registered representatives—generally sales personnel engaged in securities business activities such as sales, trading and investment banking for the member.
     
  • Principals—generally officers of the Applicant and other management and supervisory personnel involved in the day-to-day management or operation of the Applicant's investment banking or securities business. Individuals may register as a FINRA representative or principal only if employed or sponsored by a FINRA member firm or an Applicant pending membership.

 

Applications for FINRA membership should not be submitted until the Applicant and employees required to be registered are prepared to satisfy substantially all of the membership and registration requirements necessary to conduct the Applicant's proposed securities activities. Failure to provide information, correct filing deficiencies, schedule and successfully complete qualification examination requirements, or satisfy any other membership prerequisites could result in a failure to complete application processing within prescribed time frames and a lapse or denial of the application. It is strongly suggested that personnel required to be registered have satisfied their examination requirements no later than 90 days after the application has been submitted to FINRA.

The Applicant must submit a fully executed Form U4, fingerprints (electronically or by fingerprint cards) and the appropriate qualification examinations and application fees for all personnel required to be registered as a principal and/or representative. The necessary qualification examinations will be scheduled after the Form U4 processing is complete.

As noted above, an Applicant must submit a Form U4 application on behalf of an Applicant's representative(s) via Web CRD through the Firm Gateway. No individual will be effectively registered to conduct business before the Applicant itself is approved as a member.

 

Qualification and Registration Maintenance

If an individual ceases to function as a FINRA representative or principal with a member, there is a two-year period in which to reactivate registration without having to re-qualify by examination. An application for re-association with a member firm or Applicant for membership must be received by FINRA within two years of the termination date, or qualification by examination will again be required. As noted in NASD Rule 1070(d), waivers of this requirement can be requested pursuant to the FINRA Rule 9600 Series. See also FINRA's Qualification Examination Waiver Guidelines.

The two-year provision also applies to persons who may have passed a FINRA qualification examination but were never registered with FINRA. If FINRA receives the registration application within two years from the date the examination was passed, the individual will not be required to take the examination again.

 

Qualification and Registration Hierarchy

Within the representative and principal levels of registration, there are several categories of general and limited registrations. These categories relate to specific securities products or to the functions the employee performs for the Applicant.

The FINRA General Securities Representative is the broadest representative registration category. This qualification (Series 7) allows an individual to function as a representative dealing in a full range of products, including corporate equity and debt securities, real estate investment trusts, options, municipal securities, government securities, open-end and closed-end investment company shares, variable contracts, real estate securities, limited partnerships, oil and gas, and other direct participation programs.

Limited categories of registration also are available to accommodate Applicants and/or employees that exclusively specialize in certain types of securities products. A person whose activities involve a combination of limited products may choose to become qualified in each limited registration category or in the more inclusive general securities category.

With the exception of the Financial and Operations Principal or the Introducing Broker-Dealer Financial and Operations Principal under NASD Rules 1022(b) and (c) , FINRA requires individuals to qualify as a registered representative in a category before it will approve registration as a principal in that category. As a result, the majority of principal registrations are not approved until both the prerequisite representative category and the principal examinations are successfully completed.

 

Principal Registration Requirements

The NASD Rule 1010 Series outlines two registration requirements applicable to all applicants. The first is the two-principal requirement pursuant to NASD Rule 1021(e). The second is the requirement to have at least one person qualified and registered as a Financial and Operations Principal or an Introducing Broker-Dealer Financial and Operations Principal under NASD Rules 1022(b) and (c). An Applicant may apply for a waiver of the two-principal requirement of NASD Rule 1021(e), based on the Applicant conducting a very limited scope of business or the Applicant having only one person registered with the Applicant. The decision to waive the two-principal requirement is made by the FINRA MAP Group staff that is processing the membership application. Please note that waivers should be requested early in the application process—generally, as part of the initial application—to ensure a timely decision by FINRA. Failure to submit a timely request may result in processing delays or denial of the application based on the Applicant's failure to meet the principal qualification requirements. Note also that an Applicant may not obtain an exemption from the Financial and Operations Principal requirement. Each Applicant will be required to associate a Financial and Operations Principal appropriate to its proposed business.

 

Principal Registration Requirement Waiver

Under FINRA Rule 9610(a) , if an Applicant requests a waiver of the FINRA two-principal requirement, then the Applicant must submit the original request(s) in writing to the MAP Group staff processing the application, with a copy to:

 

FINRA
ATTN: Legal Assistant, Exemptions Requests
Office of the General Counsel
1735 K Street, NW
Washington, DC 20006

 

A copy to the Office of General Counsel is made for national management and oversight purposes.

Requests for a waiver of the two-principal requirement which are not submitted as part of a New Membership Application filled under NASD Rule 1013 or a Continuing Membership Application filed under NASD Rule 1017 should be submitted to the firm’s FINRA Regulatory Coordinator, with a copy to the Office of General Counsel as noted above.

It is important to note that under FINRA Rule 9610(b) , a request for a waiver or exemption must contain the following information:

 

  • the Applicant's name and address;
  • the name of the person associated with the member who will serve as the primary contact for the application;
  • the Rule from which the member is seeking exemption or waiver; and
  • a detailed statement of the grounds for granting the exemption or waiver.

 

Registration Exemptions

Employees exempt from FINRA registration include individuals whose functions:

 

  • are solely clerical and/or ministerial in nature;
  • are related solely to the member's need for nominal corporate officers or capital participation (limited partners); and
  • are related exclusively to transactions executed on a securities exchange or transactions in commodities.

 

Scheduling Examinations

Subsequent to filing a complete broker-dealer membership application, current and pending FINRA member firms may schedule qualification examinations for their personnel by filing Form U4 electronically via Web CRD and submitting appropriate application and examination fees.

The CRD system will determine and automatically schedule the required examinations appropriate for the registration categories selected in Section 4 (SRO Registrations) and Section 5 (Jurisdiction Registrations) of the Form U4. Examination scheduling is valid for a period of 120 days, during which time the Applicant's proposed associated person(s) must schedule examination appointments and take appropriate examinations. The scheduling will expire after 120 days and fees are forfeited if examinations have not been completed. In order to reschedule an expired examination, a Form U4 amendment must be filed electronically, examination fees must be submitted and the appropriate examination should be selected under Section 7 (Examination Requests) on Form U4. Applicants should ensure that examinations are taken in conjunction with the deadlines of the membership application process.

Individuals that passed a FINRA qualification examination or the Series 63 or 66 Uniform Securities Agent State Law Examination while employed by a non-FINRA firm should enter the examination type and date taken under Section 7 of the Form U4 (Exam Previously Taken). This will prevent the examination from being scheduled and fees from being assessed.

State agent registration applications on Form U4 can be submitted to CRD for processing after the state grants the Applicant clearance to do so. Processing will occur for those states checked under Section 5 of the initial Form U4 and in any subsequent amendment filings. The "AG" position is the designation used in the Web CRD system to identify a person that has been approved to sell securities in a particular state. Note that many states require qualification by examination for this position, and the qualification requirements vary from state to state. The North American Securities Administrators Association, after consultation with the states, has provided the qualification requirements used by the CRD system to establish the AG position in the various states. For questions regarding a given state's licensing requirements , Applicants should contact the state directly.

If the Applicant has not yet filed a complete Form BD or an application specialist has not been assigned, Regulatory Review and Disclosure staff are available at (301) 590-6500 to respond to questions about how to complete necessary filings, or to redirect callers as appropriate.

 

Examination Content Outlines

FINRA publishes content outlines for each of its qualification examinations, as well as a study guide for the Uniform Securities Agent Law Examination (Series 63). These outlines detail specific topics in the examination and the weighted importance of each. The outlines also contain a bibliography of reference material. The content outlines and the state law study guide can be purchased through FINRA MediaSource using the MediaSource order form included in the membership kit and found on the FINRA Web site, or from any FINRA District Office.

FINRA does not provide or evaluate any training material to prepare for qualifications examinations. Applicants are encouraged to contact vendors directly to obtain copies of training materials.

 

Qualifications and Examinations—FAQ

What's the difference between passing a qualification examination and being registered?

The difference between being licensed or registered and passing a qualification examination is effective registration with a broker-dealer. In other words, an individual can take and pass a qualification examination but not be registered to sell securities until such time as his or her registration is made effective with a broker-dealer.

 

Are one or more registration test failures a factor for consideration of "qualifications"?

Repeated failures of a required test may be a factor in considering the qualifications of an individual. Standing alone, however, the failure to pass a registration test would not cause an application for registration to be denied.

 

Must directors be registered?

Holding a management title generally indicates that the individual will be engaged in the business of the member firm, such that registration would be required. Whether a director must be registered hinges on the extent to which the individual will be involved in the management or control of the firm (principal) or engaged in the securities activities of the member (representative). The definitions that will guide FINRA staff and should be addressed by applicants are set forth in NASD Rules 1021 (principals) and 1031 (representatives). (See also NASD Notice to Members 99-49.)

 

Who administers the examinations?

Prometric and Pearson VUE administer qualifications testing and continuing education examinations to the securities industry. Certain examinations may be administered in other formats as appropriate. Information relating to the examination can be found under Qualifications & Exam Requirements.

In addition to its own qualification examinations, FINRA administers tests for other regulatory agencies, including the Municipal Securities Rulemaking Board (MSRB), the New York Stock Exchange (NYSE), the options exchanges and the National Futures Association (NFA). FINRA also administers the Series 63, Uniform Securities Agent State Law Examination; the Series 65, Uniform Investment Adviser Law Examination; and the Series 66, Combined State Law Examination for the North American Securities Administrators Association (NASAA).

 

Is there a maximum number of firms that FINRA will allow one "part-time" principal to be associated with?

There is no predefined limit on the number of firms with which a "part-time" principal may be associated. The staff will take into consideration the type of business that the Applicant will engage in as well as the amount of time that the "part-time" principal is already committed to with the other firms. The staff will verify that notification was given to all firms with which the individual is registered. For guidance, see Notice to Members 06-23 .

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