Qualification Examination Waiver Guidelines

Announcement

 

Effective July 28, 2014, member firms must submit Series 86 exemption requests made pursuant to NASD Rule 1050(c) electronically via the Firm Gateway. Firms that attempt to submit a Series 86 exemption request via email will have the request rejected. For more information on how to properly submit a Series 86 exemption request please read the additional information included below.

 

Authority to Waive Qualification Examinations and Grant Series 16 Experience Acceptability Requests

 

The NASD Rule 1000 Series specifies, among other things, registration and qualification requirements for registered representatives and principals associated with firms. NASD Rule 1070(d) authorizes FINRA, pursuant to the FINRA Rule 9600 Series, in exceptional cases and where good cause is shown, to waive qualification examinations (as specified in the NASD Rule 1000 Series) and accept other standards as evidence of an applicant's qualification for registration. This authority is to be exercised in exceptional cases and where good cause is shown by the member requesting a waiver on behalf of one of its associated persons. Rule 1070(d) further states that advanced age or physical infirmity, will not individually of themselves constitute sufficient grounds to waive a qualification examination. Experience in fields ancillary to the investment banking or securities business may constitute sufficient grounds to waive a Qualification Examination.

With respect to FINRA members that are also NYSE members (Dual Members), Incorporated NYSE Rule 345 (and its Interpretation) also specifies certain registration and qualification requirements applicable to such members. Similar to NASD Rule 1070(d), Incorporated NYSE Rule 345.15 authorizes FINRA to waive the examination requirement for a candidate for registration, where good cause is shown. While FINRA generally considers requests for examination waivers by Dual Members pursuant to NASD Rule 1070(d), FINRA applies Incorporated NYSE Rule 345.15 when considering requests by Dual Members for waivers of examinations not specified by NASD Rules.

Incorporated NYSE Rule 344 (and its Interpretation) requires candidates for the registration category of "supervisory analyst" to take and pass the Series 16 examination and present evidence of three years of appropriate experience, as described in Incorporated NYSE Rule 344.11 and Interpretation 344/03. Firms may submit Series 16 experience acceptability requests to FINRA on behalf of "supervisory analyst" candidates to provide evidence of such experience.

 

State Regulatory Agencies

 

While FINRA can grant qualification examination waivers for its requirements, it cannot make decisions in these matters for other regulatory agencies. Most applicants are subject to state licensing and qualification requirements in addition to FINRA requirements. Member firms must pursue waivers from these requirements, including NASAA's Series 63, Series 65 and Series 66 examinations, in each state where the applicant will be licensed.

 

Waiver Request Types

 

Pursuant to the provisions of Rule 1070(d), FINRA reviews each waiver request on its individual merits, taking into consideration all relevant facts presented by the sponsoring member firm. Over the years, certain patterns have emerged in the kinds of waiver requests submitted, which are summarized in the following. These qualification examination waiver request types are intended to assist member firms in recognizing situations where a basis may exist for requesting a waiver. The request types are not exhaustive, however, and are not intended to prevent members from submitting waiver requests based on reasonable grounds not addressed here.

 

Waiver Requests Based on Registration Filing Errors

 

This category of waiver request involves individuals who have been functioning in good faith as representatives or principals in member firms but whose registrations, for reasons related to the filing of the appropriate application forms, are not reflected in the Central Registration Depository (CRD®) system, the securities industry's centralized database of registered personnel. In a typical case, a member firm files an incomplete application that is eventually purged from the CRD system. After two years, the CRD system will reschedule the appropriate qualification examination(s) if the individual re-submits an application for registration. This normally occurs when the individual attempts to transfer the registration to another member firm.

FINRA may waive the examination(s) in these cases, provided the firm(s) involved document the nature of the filing error and confirm that the individual has in good faith engaged in the conduct of the investment banking or securities business during the period when the registration was not reflected in the CRD system.

 

Waiver Requests Based on Experience

 

These waiver requests are based on the applicant's experience in the securities industry and/or in related investment fields such as investment banking, securities trading on behalf of a financial institution, securities research, portfolio management, investment advisory services, or securities activities in a foreign broker/dealer. Certain law, accounting, and consulting practices related to the securities acts and regulations also may provide an appropriate basis for waiving a qualification examination. When reviewing such requests, FINRA will consider such factors as:

 

  1. the length and quality of the applicant's securities industry experience or professional experience in investment related fields;
  2. the specific registration the applicant requests and the type of business to be conducted in relation to the applicant's experience;
  3. the applicant's previous registration history, if any;
  4. the nature of any regulatory matters of which the applicant is or was a subject, including any such matters that are disclosed on the applicant's Central Registration Depository record;
  5. the applicant's age or physical condition if this is part of the basis for the waiver request, but only in conjunction with experience and other factors above;
  6. other examinations taken by the applicant, such as those for Certified Financial Planner or Chartered Financial Analyst, that may be acceptable substitutes in conjunction with experience and other factors above, for the normal securities industry qualification examination.

 

Waiver Requests Based on Educational Achievement

 

Applicants for registration who are college graduates with baccalaureate or master's degrees in Business or Finance will be required to pass the appropriate qualification examinations in order to be registered. FINRA will consider waiver requests, however, for persons who terminate their registrations and enroll in a master's or law program with a substantial emphasis on Finance and Investments. The applicant must return to a member firm promptly after completing the course of study and furnish a copy of the course transcript with the waiver request.

 

Waiver Requests Based on Regulatory Experience

 

An applicant for registration whose most recent employment has been with a securities regulatory agency, and who was previously registered with a member firm, may use the waiver process to have the registration reinstated. An applicant with regulatory experience, but no prior securities registration, must have at least five years of regulatory experience for a waiver request to be considered. In either case, FINRA will consider the scope and nature of the regulatory experience in deciding the waiver request.

 

Disposition of Waiver Requests

 

A waiver request may be unconditionally granted, conditionally granted or denied. Unconditional waivers represent only a small fraction of the waivers granted. Most waivers of registered representatives' examinations are conditional on the applicant successfully completing a Regulatory Element training session pursuant to FINRA Continuing Education Rule 1250. Principal examinations are rarely waived.

 

Series 86 Exemption Requests

 

Under NASD Rule 1050, all persons associated with a member who are to function as research analysts shall be registered with FINRA. Before registration as a Research Analyst can become effective, an applicant shall:
(1) be registered pursuant to Rule 1032 as a General Securities Representative; and
(2) pass a Qualification Examination for Research Analysts as specified by the Board of Governors.

 

FINRA/NASD may grant an exemption from the analytical portion of the Research Analyst Qualification Examination (Series 86) upon verification that the applicant has passed:
(1) Levels I and II of the Chartered Financial Analyst ("CFA") Examination; or
(2) if the applicant functions as a research analyst who prepares only technical research reports as defined in paragraph (e), Levels I and II of the Chartered Market Technician ("CMT") Examination; and
(3) has either functioned as a research analyst continuously since having passed the Level II CFA or CMT examination or applied for registration as a research analyst within two years of having passed the Level II CFA or CMT examination.

 

Please see FINRA rule 1050 or NTM 05-24 for more information on Series 86 exemptions.

 

Firm Gateway Electronic Waiver Request Submission Process 

 

Requests for qualification examination waivers, Series 86 exemptions, and Series 16 experience acceptability must be submitted by a member firm on behalf of the applicant. Requests by individuals will not be considered. The request must be submitted via the Firm Gateway at https://firms.finra.org/examwaivers. The member firm uses one online form to submit examination waiver or Series 86 exemption requests and a second online form to request Series 16 experience acceptability. Requests filed in a paper or email format will not be accepted. For more information, see Regulatory Notice 08-67.

 

For all examination waiver requests, Series 86 exemption requests, and Series 16 experience acceptability requests, firms must submit a Uniform Application for Securities Industry Registration or Transfer (Form U4) electronically via the CRD at least one business day prior to submitting such requests via the Firm Gateway. The Form U4 must request an open examination window for each examination requested waived or exempted, and each Series 16 experience acceptability request. The new process requires the same information currently required for qualification examination waivers, Series 86 exemptions and Series 16 experience acceptability submissions, and allows firms to attach supporting documentation to such requests.

For qualification examination waiver requests, the member firm must provide:

 

  1. Applicant's CRD Number;
  2. Qualification examination(s) for which the waiver is being requested;
  3. Reason for the waiver request; and
  4. Documentation supporting the waiver request.

 

For Series 16 experience acceptability requests, the member firm must provide:

 

  1. Applicant's CRD Number;
  2. Statement on applicant's experience;
  3. Whether applicant is a Chartered Financial Analyst; and
  4. Whether applicant intends to take Part 1, Part 2 or both parts of the Series 16 examination.

 

For Series 86 exemption requests, the member firm must provide:

 

  1. Applicant's full name;
  2. Applicant’s CRD number;
  3. Applicant’s Date of birth
  4. CFA Institute ID number or CMT ID number

 

Requests for additional information by FINRA will be conveyed by FINRA via email. Firms are to reply to the email with the additional information requested.

 

Effective August 18, 2014, FINRA will convey its decision on the request via email. The applicant must satisfy any conditions attached to a waiver before the applicant's registration will become effective. Decision letters for waiver requests and Series 86 exemption requests will be delivered via email to the email address provided by the firm on the waiver request form in Firm Gateway.

 

A member firm may appeal a waiver decision on behalf of the applicant within 15 calendar days after receipt of the decision. Any such appeal should be submitted in the form described in FINRA Rule 9630 to:

Office of the General Counsel
FINRA Regulatory Practice and Policy

Exam Waiver Appeals
1735 K Street, NW
Washington, DC 20006
Attn: Megan Rauch

Individuals who have questions regarding the waiver process should be directed to the registration and licensing group in their member firms. Questions member firms have regarding the waiver process may be directed to the following FINRA staff member:

Lakeisha Prather (240) 386-4681

 

Entitlements

 

Each firm's primary account administrator for Web CRD has waiver submission entitlement privileges. Account administrators that do not have entitlement privileges can request them through the firm’s Super Account Administrator (SAA) (see FINRA Entitlement Page).