FINRA Proposes Streamlining Competency Exams
New Securities Industry Essentials Exam Expands Entry Opportunities to the Securities Industry
WASHINGTON — The Financial Industry Regulatory Authority (FINRA) announced today that it has filed a proposal with the Securities and Exchange Commission (SEC) to streamline competency exams and facilitate opportunities for professionals seeking to enter or re-enter the securities industry.
“This new approach would give individuals seeking to enter the securities industry the opportunity to demonstrate a fundamental knowledge of regulatory requirements prior to joining a firm, potentially providing firms a larger pool of qualified candidates,” said FINRA President and CEO Robert W. Cook. “It would also provide enhanced flexibility and efficiency in our qualifications programs, while maintaining important standards and investor protections.”
Since Mr. Cook became President and CEO in August, he has conducted an extensive listening tour among individuals inside and outside of the brokerage industry, and in January announced an initiative to evaluate various aspects of FINRA’s operations and programs.
FINRA rules currently require individuals who work for a FINRA-regulated firm in various capacities to demonstrate their qualifications by passing specific exams. These individuals must be associated with a FINRA-regulated firm to be eligible to take FINRA qualification exams. In 2016, FINRA had more than 90,000 representative-level exam candidates.
The proposal revises the current exam structure to eliminate duplicative testing and barriers to demonstrating and maintaining qualifications. The proposed changes would make it easier for an individual with no prior securities industry experience – whether an investor, a recent college graduate or a professional seeking a second career – to take a general knowledge exam called the Securities Industry EssentialsTM (SIETM) as an important first step to entering the industry. Individuals who wish to enter the industry are also required to pass a second more specialized knowledge exam, and must be associated with and sponsored by a firm.
In addition, individuals who transfer to a financial services affiliate of a firm may qualify for a waiver that allows their credentials to be reinstated, should they return to the industry within a seven-year period and meet the requirements of this waiver program.
The proposal’s specific requirements include:
- Representative-level registrants will take the SIE and then choose tailored, specialized knowledge exams for their desired registered role. This model will eliminate duplicative testing of general securities knowledge on exams.
- Individuals who do not work for a FINRA-regulated firm, including members of the general public, may take the SIE. This change will provide individuals the flexibility to demonstrate their knowledge of the securities industry and its regulatory requirements before joining a FINRA-regulated firm, as is currently required.
- Individuals in good standing who transfer to a financial services affiliate of a firm can return within seven years without re-taking their qualification exams, provided they complete securities industry continuing education and have no disclosable adverse events. Currently, if an individual is registered and transfers to a financial services affiliate for two or more years, the individual’s qualification expires and the individual must re-take an exam to be re-qualified.
- Any individual associated with a firm may obtain and maintain any qualification and registration permitted by the firm. This change will allow registered personnel to demonstrate proficiency for new roles in a firm and help firms better manage unanticipated needs for registered personnel by allowing them to maintain a roster of registered employees available to meet those needs.
Once a proposal is filed with the SEC, SEC staff reviews it to determine whether it is consistent with the requirements of the Securities Exchange Act of 1934. SEC staff may request changes or amendments to the proposal. The SEC then publishes the proposal for comment in the Federal Register. In general, the comment period is open for 21 days following publication.
FINRA is dedicated to investor protection and market integrity. It regulates one critical part of the securities industry – brokerage firms doing business with the public in the United States. FINRA, overseen by the SEC, writes rules, examines for and enforces compliance with FINRA rules and federal securities laws, registers broker-dealer personnel and offers them education and training, and informs the investing public. In addition, FINRA provides surveillance and other regulatory services for equities and options markets, as well as trade reporting and other industry utilities. FINRA also administers a dispute resolution forum for investors and brokerage firms and their registered employees. For more information, visit www.finra.org.