finra

FINRA

News Release 

 

FOR RELEASE:
CONTACTS:
Friday, January 6, 2006
Nancy Condon (202) 728-8379

 

 

NASD Says Software Error Impacts Certain Series 7 Exam Results 

Washington, DC  NASD today announced that it has begun notifying a limited number of individuals who took the Series 7 broker qualification exam between Oct. 1, 2004, and Dec. 20, 2005, to tell them that they incorrectly received a failing grade due to a software error. The error, which affected only exams on the cusp of the pass/fail line, caused some test takers to score just below the minimum passing grade.


NASD administered Series 7 examinations to approximately 60,500 individuals from Oct. 1, 2004, to Dec. 20, 2005.  NASD noted that of the 1,882 people who incorrectly received a failing grade, slightly over 1,000 have already re-taken the exam and passed; more than 600 have not as yet rescheduled an exam date, and just over 200 individuals are scheduled to retake the exam.


No individuals received a passing grade in error. 


NASD is contacting all affected individuals and firms with an initial focus on advising those currently rescheduled to take the exam that they have passed and do not need to re-take the Series 7. In addition to contacting exam takers, NASD also is contacting firms who sponsored these individuals to take the exam, and is correcting individual records in its CRD registered representative database. And any affected individual who is not currently associated with a firm in the securities industry will be afforded a 2-year period starting Feb. 1, 2006, to reassociate without having to re-take the Series 7 exam.


"NASD will immediately notify the affected individuals and firms," said Robert R. Glauber, Chairman and Chief Executive Officer of NASD. "In addition, because the integrity of our testing program is fundamental, we have undertaken a full review of this issue and are putting in place enhanced quality control measures designed to prevent a future reoccurrence.  As appropriate, we will communicate any corrective measures.


"We apologize for the problems this caused for the individuals and firms affected."


The Series 7 is an exam covering critical areas of securities markets, and the laws, regulations and responsibilities of registered representatives.  Receiving a passing grade on the Series 7 is a requirement for an individual to conduct securities business with the public.


NASD administers the Series 7 on behalf of itself and other SROs.  Each exam is comprised of 250 questions, with questions being selected from a large database of questions.  New questions are cycled into the pool on a regular basis.


The grading error relates to 213 questions that were introduced to the pool beginning in October 2004.  Because each Series 7 test is unique, a computer model is used to account for differences in test difficulty and to weight questions appropriately.  The Series 7 passing score of 70 percent is subject to minor statistical adjustments based on the overall difficulty of each individual's examination. The error occurred in the weighting process in exams including one or more of the 213 questions.    


In addition to reaching out to those affected and correcting all records, NASD also is implementing a full software code review and conducting independent manual test validation reviews. In addition, NASD is creating new and more sophisticated monitoring mechanisms to alert reviewers when certain statistical parameters are crossed.  NASD also is in the process of replacing the technology used for the Series 7.  The current system was first introduced in 1990, and is scheduled to be replaced with a new system that will be phased in beginning later this year.   


NASD is communicating with affected firms regarding impacted individuals.  Firms' Registration Departments should contact NASD's Call Center at (301) 869-6699 with questions.  Individuals should contact their firm's Registration Department or NASD's Call Center.


NASD touches virtually every aspect of the securities business - from registering and educating all industry participants, to examining securities firms, enforcing both NASD rules and the federal securities laws, and administering the largest dispute resolution forum for investors and registered firms. For more information, please visit our Web site at www.nasd.com.