Qualification Exam Restructuring

Background

FINRA administers qualification examinations that are designed to establish that persons associated with broker-dealers have attained specified levels of competence and knowledge pertinent to their function. Over time, the qualification examination program has increased in complexity to address new products and functions, and related regulatory concerns and requirements. As a result, there are currently 16 representative level exams, with considerable content overlap across them.

To improve its representative-level examination program, FINRA is launching a new Securities Industry Essentials (SIE) exam and revising the representative-level qualification exams. The restructured program, which aligns with our goal of creating efficiencies through FINRA360, is designed to eliminate duplicative testing of general securities knowledge on the representative-level exams by moving such content into the SIE. The SIE will test fundamental securities-related knowledge, including knowledge of basic products, the structure and function of the securities industry, the regulatory agencies and their functions and regulated and prohibited practices, whereas the revised representative-level exams will test knowledge relevant to day-to-day activities, responsibilities and job functions of representatives. The restructured program also eliminates several representative-level registration categories and related exams that have become outdated or have limited utility.

Effective October 1, 2018, new applicants seeking to register as representatives must pass the SIE and a revised representative-level exam, such as the revised General Securities Representative (Series 7) exam, appropriate to their job functions at the firm with which they are associating before their registration can become effective.

Under the restructured program, individuals are not required to be associated with a member firm to be eligible to take the SIE exam. Further, a passing result on the SIE will be valid for four years. Thus, the new exam structure will enable prospective securities industry professionals to demonstrate to potential employers a basic level of knowledge prior to a job application. Individuals can also use the SIE to assess their readiness to enter the securities industry. However, passing the SIE alone will not qualify an individual for registration with FINRA. To be eligible for registration, an individual must also be associated with a firm, pass an appropriate qualification exam for representative or principal status and satisfy the other requirements relating to the registration process.

In addition to these changes, FINRA is evaluating other possible improvements to the qualification process. For example, we are considering a mechanism by which individuals could maintain their qualification status when no longer associated with a firm through the satisfactory completion of continuing education requirements. We also are considering an annual, credit-based requirement that would harmonize the regulatory and firm elements of the current continuing education program. We look forward to collaborating with the Securities Industry Council on Continuing Education as well as with our regulatory partners in exploring these changes in the near future and seeking public comment.

Summary of Actions

  • Restructured the current representative-level qualification examination program into a more efficient format.
  • Beginning October 1, 2018, all potential representative-level registrants will take a general knowledge exam (the SIE) and a tailored, specialized knowledge exam (a revised representative-level exam) for their particular registered role.
  • Individuals who are not associated persons of firms, such as members of the public, will also be eligible to take the SIE.
  • FINRA is retiring exams that have become outdated or have limited utility.