Registration and Qualification FAQ

Exam Restructuring

Following are frequently asked questions (FAQ) about FINRA registration and qualification requirements. Click on the links below to view all sections of the FAQ.

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Exams


1. What exam is required to trade certificates of deposit (CDs)?

An individual associated with a firm must register with FINRA and possess either a General Securities (Series 7) or a Corporate Securities (Series 62) registration to effect transactions in CDs that are structured as securities. In general, an ordinary CD issued by a regulated financial institution and insured by the Federal Deposit Insurance Corporation (FDIC) is not considered to be a security. However, the marketing and distribution of a CD may create a security under the federal securities laws, which, as noted above, would require an individual associated with a firm to possess either the General Securities (Series 7) or Corporate Securities (Series 62) registration to effect transactions in such products.

Beginning October 1, 2018, to obtain a General Securities (Series 7) registration, an individual must pass the Securities Industry Essentials (SIE) exam and the revised Series 7 exam. FINRA is retiring the Series 62 exam. Individuals will no longer be able to take the Series 62 exam after September 30, 2018. For more information, refer to Regulatory Notice 17-30.

2. If I pass a FINRA exam, do I still have to take the Series 63 exam?

Most states require the Uniform Securities Agent State Law (Series 63) Exam for individuals who will transact a securities business. This qualification requirement adds onto FINRA's requirements.

3. Is there a pre-requisite requirement for the Municipal Fund Securities Principal (Series 51) Exam?

An individual seeking to qualify as a Municipal Fund Securities Principal must be qualified as a General Securities Principal (Series 24) or Investment Company/Variable Contracts Principal (Series 26).

 

Foreign Associates


Beginning October 1, 2018, individuals will no longer be able to request a Foreign Associate registration. An individual registered as a Foreign Associate as of September 30, 2018, may continue to maintain that registration. However, if the individual subsequently terminates their Foreign Associate registration with FINRA, they will not be able to re-register as a Foreign Associate. For more information, refer to Regulatory Notice 17-30.

1. Who is eligible for registration as a Foreign Associate? What functions may an individual holding a Foreign Associate registration perform at a firm?

An individual holding a Foreign Associate registration who is not a citizen, national or resident of the U.S. or any of its territories or possessions who does not engage in securities activities with or for any resident, citizen or national of the U.S may engage in securities activities for the firm outside the jurisdiction of the U.S. only.

2. How do I become registered as a Foreign Associate?

A FINRA-registered firm must submit a Form U4 in Web CRD to request registration as a Foreign Associate on your behalf. There is no exam requirement associated with this type of registration.

As noted above, individuals will no longer be able to request this registration beginning October 1, 2018.

3. In what capacity may an individual registered as a Foreign Associate act on behalf of a firm?

An individual holding a Foreign Associate registration may act in any registered capacity on behalf of the firm that is consistent with this designation. This can include acting as a trader or being the registered person responsible for servicing accounts of a foreign national.

4. In what capacity may a foreign finder act on behalf of a firm?

Foreign finders are not considered associated persons of a firm. The sole involvement of a foreign finder is the initial referral of non-U.S. customers to the firm.

Registration


1. Who must register as a representative?

Anyone actively involved in a firm's investment banking or securities business must be registered as a representative with FINRA. Their duties may include supervision, solicitation, or training of persons associated with the member.

[NASD Membership and Registration Rule 1031(b) - Definition of Representative; Effective October 1, 2018 FINRA Registration Categories Rule 1220(b)(1) - Definition of Representative]

2. Who must register as a principal?

Persons associated with a firm, who are actively engaged in the management of the firm's investment banking or securities business, including supervision, solicitation, conduct of business, or the training of persons associated with a member for any of these functions are designated as principals. Such persons shall include:

  • sole proprietors,
  • officers,
  • partners,
  • managers of offices of supervisory jurisdiction, and
  • directors of corporations.

[NASD Membership and Registration Rule 1021(b) - Definition of Principal; Effective October 1, 2018 FINRA Registration Categories Rule 1220(a)(1) - Definition of Principal]

3. What are the registration and qualification requirements for a FINRA-registered firm's chief compliance officer (CCO)?

The CCO must be designated on Schedule A of a firm's Form BD and must hold a General Securities Principal (Series 24) registration. Beginning October 1, 2018, an individual designated as CCO on Schedule A of Form BD of a member firm, other than a firm engaged in limited investment banking or securities business, is required to register as a compliance officer.

If the firm's activities are limited to particular areas of the investment banking or securities business, the CCO may apply for a limited principal registration, such as the Limited Principal Investment Company and Variable Contracts Products (Series 26), Limited Principal Direct Participation Programs (Series 39), and Government Securities Principal.

Individuals registering as compliance officers on or after October 1, 2018, are required to 1) pass the Compliance Official (Series 14) Exam; or 2) pass the SIE, the General Securities Representative (Series 7) Exam and the General Securities Principal (Series 24) Exam.

For more information, refer to Notice to Members 01-51 and Regulatory Notice 17-30.

4. Can I solicit customer accounts once my firm submits the Form U4 for me to FINRA, but before my registration becomes effective?

No. You are not permitted to perform registered representative functions until your registration becomes approved with all regulatory organizations and state securities commissions. You are permitted to work in other areas at the firm if the tasks do not require registration.

5. Can I continue to service my customers' accounts before my re-registration becomes effective with my new employer member?

No. You are not permitted to transact any securities business until your registration with your new firm is approved.

6. If a friend who is not registered with FINRA refers clients to me, may I pay them a commission for these referrals?

No. You are not permitted to share commissions generated from securities transactions with non-registered individuals.

7. Can I maintain an active registration with two FINRA-registered firms concurrently?

FINRA does not prohibit an individual from maintaining concurrent registrations, but both firms must agree to this arrangement. You must be sure that this dual affiliation does not violate the registration requirements of other self-regulatory organizations (SROs) or state securities commissions.

8. How long will my qualification exam(s) be valid after I end my affiliation with a FINRA-registered firm?

Your exam(s) will be valid up to two years after your registration has been terminated. (Note: The two years are calculated from the employment end date with the prior employer or from the continuing education inactive date.)

Beginning October 1, 2018, your SIE exam is valid up to four years. All other exams will be valid for two years after your registration has been terminated.

[NASD Membership and Registration Rules 1021(c) and 1031(c) - Requirements for Examination on Lapse of Registration; Effective October 1, 2018 FINRA Registration Requirements 1210.08 - Lapse of Registration and Expiration of SIE​]

9. I am currently registered as a General Securities Representative (Series 7). I want to join a direct participation program (DPP) firm. Will I lose my General Securities status if this new firm registers me as a DPP representative?

You are permitted to join a DPP firm without losing your General Securities status. This applies to re-registration in any limited representative category.

[NASD Membership and Registration Rule 1031-Registration Requirements; Effective October 1, 2018 FINRA Registration Requirements 1210; FINRA Registration Categories Rule 1220(b) - Definition of Representative and Representative Registration Categories]

10. I held a General Securities Principal (Series 24) registration. Now I am with a new firm and will only register as a General Securities Representative (Series 7). Will I lose my principal status?

If you do not re-register as a principal within two years of your last principal registration, the principal qualification will lapse. You must then retest to function in that capacity in the future.

[NASD Membership and Registration Rules 1031(a) and 1031(c) - Registration Requirements; and Requirements for Examination on Lapse of Registration; Effective October 1, 2018 FINRA Registration Requirements Rule 1210; FINRA Registration Requirements 1210.08 - Lapse of Registration and Expiration of SIE]

11. I am joining a FINRA-registered firm as a consultant to hold public seminars promoting its products and services. Should I register since this firm does not technically employ me?

The activity described requires registration as a representative or principal. Your employment status does not affect your involvement in the firm's investment banking or securities business.

[NASD Membership and Registration Rules 1020 and 1030 Registration of Principal and Representative; Effective October 1, 2018 FINRA Registration Requirements Rule 1210; FINRA Registration Categories Rule 1220]

12. I am an independent contractor (not an employee) of a large insurance company. I refer potential customers to this firm. Should I become registered?

Under FINRA rules, job functions determine the registration requirement. Therefore, you must be registered if you solicit customer accounts for a firm regardless of the terms of your contract with this firm.

[NASD Membership and Registration Rule 1021(b) and Rule 1031(b) - Definition of Principal and Definition of Representative; Effective October 1, 2018 FINRA Registration Requirements Rule 1210; FINRA Registration Categories Rule 1220]

13. Can a firm hire unregistered individuals whose sole function will be to cold call potential customers?

FINRA-registered firms are permitted to employ unregistered individuals for the purposes of:

  • extending invitations to firm-sponsored events at which presentations and account or order solicitation will be conducted by appropriately registered personnel;
  • inquiring whether the prospective customer wants to discuss investments with a registered person; and
  • determining whether the prospective customer wants to receive investment literature from the firm.

The firms employing unregistered persons to perform these functions must be sure these employees do not discuss general or specific investment products or services offered by the firm; prequalify prospective customers as to financial status, investment history and objectives; or solicit new accounts or orders.

[NASD Membership and Registration Rule 1031(b) - Definition of Representative; Effective October 1, 2018 FINRA Registration Categories Rule 1220(a) - Definition of Principal and Principal Registration Categories; FINRA Registration Categories Rule 1220(b) - Definition of Representative and Representative Registration Categories]

14. While registered with firm "A," can I sell limited partnership interests for non-member firm "B" in a private placement?

To participate in a private securities transaction, you must provide your firm written notice describing the proposed transaction and your role in this activity. You must also notify your firm whether you have received or will receive selling compensation in connection with the transaction. The firm must provide you with a written statement advising whether it approves or disapproves your participation in the proposed transaction. If the firm allows such activity, the firm must record the transaction(s) on its books and records. The firm must also supervise your participation in the transaction.

[FINRA Rule 3280 - Private Securities Transactions of an Associated Person]

15. A firm wants to employ me to sell securities only to institutions. I will not have any retail customers. Do I have to register with FINRA?

Yes. Under FINRA rules, anyone associated with a firm who engages in the investment banking or securities business for the firm must register. The rules do not distinguish between retail and institutional securities customers.

[NASD Membership and Registration Rules 1021 and 1031 - Registration Requirements for Principals and Representatives; Effective October 1, 2018 FINRA Registration Requirements Rule 1210; FINRA Registration Categories Rule 1220]

16. Do I need to register if I will only be selling exempt securities?

Yes. The terms "exempt securities" and "exempt transactions" mean these particular securities or transactions (private placements or intrastate offerings) are exempt from the filing requirements of the Securities Act of 1933. Anyone dealing with exempt securities and/or exempt transactions, however, must register.

[Securities Act of 1933 Sections 3 and 4]