FINRA’s Competency Exam Updates Lower Barriers for Industry Newcomers


Aspiring brokers will no longer need a firm to sponsor them in order to take FINRA’s competency exams. The Securities and Exchange Commission has just approved FINRA Regulatory Notice  17-30, which will make this and other changes effective within a year.

According to FINRA, the rule change aims to:

  1. adopt consolidated FINRA registration rules;
  2. restructure the representative-level qualification examinations by creating a general knowledge examination called the Securities Industry Essentials (SIE) and transforming the representative-level examinations into specialized knowledge examinations; and
  3. amend the Continuing Education (CE) requirements.

Under the updated rule, all applicants to registered representative positions will have to pass a new general knowledge test, the SIE (Securities Industry Essentials).

Then, they will take a specific exam, such as the General Securities Representative (Series 7), depending on the functions associated with each particular position and firm. The general knowledge test will be open to any individual, without the need of a prior record in the industry or the sponsorship of a broker-dealer.

Because exams will be valid for four years, successful applicants will have plenty of time to try to find a position with a registered firm.

Besides lowering barriers for entry into the industry, the renewed system also eliminates some existing duplications in testing, as well as exam elements that have become obsolete. For example, registered persons transferring from one firm to another will -under certain conditions- not have to retake the general knowledge test, only the specialized examination associated with the position at hand.

“This is an important change built upon the need to streamline the examination process and eliminate redundancies in qualification and registration requirements… The new structure brings greater consistency and uniformity to the process for entering and returning to the brokerage industry,” FINRA’s CEO, Robert Cook, has commented.

FINRA will consider examination waiver requests submitted by firms:

  • “for individuals associated with the firm who are seeking registration in a representative- or principal-level registration category,” either of the SIE alone or of both the SIE and the representative- and principal-level examination(s).
  • for individuals in good standing with UK and Canadian stock exchange or securities regulators,
  • for individuals “who terminate their registrations as representatives or principals to go to work for a foreign or domestic financial services industry affiliate of a member firm.”

Some of these waivers involve a number of requirements, for example, that the applicant must have “continuously worked for a financial services industry affiliate of a member firm since his or her last Form U5 filing.”

For Cook, “the new structure brings greater consistency and uniformity to the process for entering and returning to the brokerage industry,” Undoubtedly, young aspiring FAs will now have more opportunities to become eligible for positions at FINRA member firms, and broker transfers  between firms will become more dynamic.

Taking a position at a FINRA member firm? Keep the Herskovits PLLC contact information on hand for securities law questions or challenges throughout your career.  

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