Managing investments is serious business, especially when it’s other people’s investments that you’re managing. The Financial Industry Regulatory Authority (FINRA), formerly known as the National Association of Securities Dealers (NASD), oversees securities firms that handle investments by individuals and corporations. FINRA makes sure that these firms comply with the rules and hire competent individuals to perform investment management tasks. In the United States, FINRA oversees more than 150,000 brokerage firms and branch offices. They also oversee more than 600,000 individual brokers who manage investment for those firms.
As it says on the FINRA Web site: “Any person associated with a member firm who is engaged in the securities business of the firm — including partners, officers, directors, branch managers, department supervisors, and salespersons — must register with FINRA.”
If you work for a securities firm in one of those capacities, you need to be licensed by FINRA. But what exactly does this involve? Generally, it involves taking one of several exams that FINRA administers to certify individuals who work for securities and investment firms. These exams give you credentials for working in specific jobs, with the credentials that you require (and the exam that you must take in order to acquire them) varying according to what job you hold. You may even be required to take more than one exam. In fact, there are quite a few different FINRA exams. Here are some of the best known:
- Series 7 – The Series 7 exam is for stockbrokers. To pass the test you will need to understand stocks and securities, how stocks are traded, how mutual funds function, and dozens of other subjects relevant to the trading of financial securities. You will also need to know the industry rules for how clients are acquired and treated. The Series 7 exam is regarded in the industry as a difficult test and requires a wide range of financial knowledge in order to achieve a passing grade.
- Series 6 – Series 6 is a more limited version of Series 7 and permits you to perform only a small range of securities transactions, such as dealing with mutual funds. However, the test requires less knowledge and could be taken as a precursor to an eventual Series 7.
- Series 63 – Also known as the Uniform Securities Agent State Law exam, Series 63 is possibly the most important of the FINRA exams. Although administered by FINRA, it is actually required by the North American Securities Administrators Association (NASAA) and, if passed, will allow you to trade securities in any state of the U.S., not just the one where you took the test. The importance of this is that it allows you to perform transactions across state lines, which would make you more valuable to any securities brokerage. It requires knowledge of the Uniform Securities Act, which governs interstate transactions.
For the most part, you cannot take the FINRA Exams on your own initiative. Your employer must sponsor you for the test, which means you can’t take these exams in anticipation of using them to find a good job in the securities business. An exception is Series 65, or the Uniform Investment Adviser Law Exam, which is required by some states if you are to work in the investment business.
Every one of the FINRA tests is different, but they generally consist of a series of multiple choice questions and take between one and three hours to complete. There is a registration fee that varies by exam. The test itself can be taken at several different examination centers. Consult the FINRA Web site (http://www.finra.org/) for information on how to contact an examination center and register for the test you wish to take.
A number of organizations offer courses. Training classes may be available at the investment firm where you work, but it is advised that you consider investing in a study guide for specific exams or for FINRA exams in general.
FINRA Exam Details
The Financial Industry Regulatory Authority (FINRA) offers a wide variety of exams available to certify individuals for important positions in the investment field. These exams differ considerably in cost, number of questions, and the amount of time allotted for the test taker to finish them. It’s wise to know these details before applying for the test, so that you won’t be blindsided by an unusually expensive test (though in many cases your employer will probably offer to pay the fee) or a long exam that will take more time than you can devote to being away from the office. On this page we’ve compiled a list of these details for several of the most popular exams so that you can get an idea of what you’ll be facing on exam day.
- Series 3: The National Commodities Futures Examination. This exam contains 120 questions, costs $125 and is taken over a 2.5 hour period.
- Series 4: The Registered Options Principal Licensing Examination. This exam contains 125 questions, costs $105 and is taken over a 3.25 hour period.
- Series 6: The Investment Company Products/Variable Contracts Limited Representative Qualification Examination. This exam contains 100 questions, costs $100 and is taken over a 2.25 hour period.
- Series 7: The General Securities Representative Examination. This exam contains 250 questions, costs $305 and is taken over two three-hour periods.
- Series 9/10: The General Securities Sales Supervisor Qualification Examination. This two-part exam contains 200 questions, costs $80 for the first part and an additional $125 for the second part, and takes an hour and a half for the first part and four hours for the second part.
- Series 11: The Assistant Representative Order Processing Examination. This exam contains 50 questions, costs $80 and is taken over a one-hour period.
- Series 14: The Compliance Officer Examination. This exam contains 110 questions, costs $350 and is taken over a three-hour period.
- Series 23: The General Securities Principal-Sales Supervisor Module Examination. This exam contains 100 questions, costs $100 and is taken over a two-and-a-half-hour period.
- Series 24: The General Securities Principal Examination. This exam contains 150 questions, costs $120 and is taken over a period of 3.75 hours.
- Series 26: The Investment Company Products Variable Contracts Limited Principal Qualification Examination. This exam contains 110 questions, costs $100 and is taken over a period of 2.75 hours.
- Series 27: The Financial and Operations Principal Qualifications Examination. This exam contains 145 questions and costs $120.
- Series 30: The Branch Manager Futures Examination. This exam contains 50 questions, costs $80 and is taken over a one-hour period.
- Series 31: The Futures Managed Funds Examination. This exam contains 45 questions, costs $80 and is taken over a one-hour period.
- Series 51: The Municipal Securities Limited Principal Examination. This exam contains 60 questions, costs $255 and is taken over one-and-a-half hours.
- Series 53: The Municipal Securities Representative Examination. This exam contains 100 questions, costs $265 and is taken over a period of three hours.
- Series 62: The Corporate Securities Limited Representative Examination. This exam contains 115 questions and costs $95.
- Series 63: The Uniform Securities Agent State Law Examination. This exam contains 60 questions, costs $125 and is taken over a period of an hour and fifteen minutes.
- Series 65: The Uniform Adviser Law Examination. This exam contains 130 questions, costs $165 and is taken over a period of three hours.
- Series 66: The Uniform Combined State Law Examination. This exam contains 100 questions and is taken over a period of two-and-a-half hours.
FINRA Exam Study Guides
If you want to work in the investment industry, where do you get the knowledge? One way is to go to school and acquire a business degree, ideally an MBA (Masters of Business Administration) degree. Another is to go to a technical school that offers specialized courses in subjects such as securities trading. But even if you’ve done all these things, it’s difficult to be sure that you have the knowledge necessary to pass the exams offered by FINRA, many of which are lengthy, difficult and require a deep knowledge of the subject being tested.
Our advice, in addition to all of the above, is to purchase one or more study guides for the FINRA exams. These guides are available over the Internet or at bookstores and come in many forms, including books, flashcards, DVDs, CDs and software. They will not only help you gain a basic grounding in the subject matter being tested, but — if you already have that basic grounding based on your previous education — will let you know exactly what is going to be covered on the FINRA exams themselves. Most study guides will offer sample questions that might appear on the exams and tips on how to prepare yourself for exam day. A good study guide will not only tell you what information you need to know to pass the FINRA exam but will give you confidence that you are prepared and ready for whatever the exam may throw at you. There’s nothing worse than a case of jitters on exam day or the sort of pre-exam anxiety that will cause everything you know about the investment industry to disappear from your head the moment you start to take the test.
Study guides aren’t necessarily cheap, but they usually aren’t any more expensive than the exam fee itself and in many cases they cost hundreds of dollars less. However, you should think of such a guide, not as an expense, but as an investment in your future. As a potential securities professional, you know how important investments are. The FINRA exams can help you move into important and high-paying positions within an investment firm and gain the kind of income that will give you the future that you’ve been hoping for.
Note that in most cases you can’t apply for any of the FINRA exams on your own. You must already work for an investment firm and have their sponsorship before you can apply and be accepted for the examination. The firm you work for may even offer a study program of its own to help employees get up to speed on the subjects they are to be tested on by FINRA. Nonetheless, a study guide can provide the extra insurance — and confidence — that you need to guarantee that you will get your desired certification and the job of your choice.
Taking FINRA Exams
Before you can take one of the investment professional certification exams offered by the Financial Industry Regulatory Authority (FINRA), you must have the sponsorship of the investment company for which you work. (There are a small number of FINRA exams that can be taken on individual initiative, but these are the exceptions rather than the rule.) Once you’ve been given the authorization to take the exam, what do you do after that?
It’s possible that you’ll have to do nothing until exam time. If your firm is large enough and has an HR person responsible for the certification of company employees, this person may make all the arrangements for you and inform you of the time and date when you need to show up. You can then sit back, study for the exam, and wait. Alas, not all companies will have such facilities and you may have to do the job yourself, in which case you can take these steps:
FINRA exams are generally given by one of two different organizations: Prometric or Pearson VUE. You can choose which of these testing companies you wish to take the exam with, though you may not schedule the exam with both. (It seems unlikely that anyone would want to do this, but it’s explicitly forbidden by FINRA policy.) Both the Pearson VUE Web site (http://www8.pearsonvue.com/) and the Prometric Web site (http://www.prometric.com/default.htm) offered facilities for locating an examination site. You can then use their Web sites to make arrangements for taking the exam. You will be informed of the date and time and of any special regulations concerning the exam day itself. (For instance, you are allowed to bring calculators to some exams and not to others.)
You are generally expected to arrive at the test center 30 minutes before the time of the exam. You will need to bring identification, usually some form of photo identification, such as a driver’s license or job ID, and a second form of identification, such as a credit card or check cashing card. (Social Security cards are not, in most cases, considered an acceptable form of ID.) You may need to bring an authorization form from your employer indicating that you are being officially sponsored for the exam. However, the specific items that you need to bring will vary from one exam to another and from one testing center to another, so it will be necessary to contact the testing center for details.
In almost all instances the tests will be multiple choice and will be given at a computer terminal, so no pencil or paper will be required. Information for test takers needing to contact Prometric can be found at this Web page:http://www.prometric.com/TestTakers/ContactUs/default.htm. Information for contacting Pearson VUE can be found at this Web page: http://www8.pearsonvue.com/contact/. It would be a good idea to consult those Web pages for other test-related issues as well, to find out who to contact if problems arise. To contact FINRA itself, the main telephone number is (301) 590-6500. (This is a Maryland number and may be a toll call for some callers.)
Because the tests are taken by computer, you should have your results quickly, either from the testing center itself or via your employers. The tests may be taken again if not passed on the first try, assuming that your employer is willing to continue its sponsorship.
FINRA Continuing Education Program
The Financial Industry Regulatory Authority (FINRA) offers a continuing education program for investment professionals so that they can keep their technical knowledge of the field fresh and stay abreast of new developments in the industry. This continuing education program represents a good way to learn the information necessary for the FINRA exams, which are in turn necessary if you are to take a position of responsibility within a financial investment firm. The more information you have about the investment industry, the more FINRA certification exams you will be able to pass and the more important the role you can play in the investment firm for which you work.
Once registered for this continuing education program, there are two portions of it that become mandatory: the regulatory element and the firm element. We’ll talk about each of these in turn:
The Regulatory Element. Within 120 days after the approval of your registration for the continuing education program, you must take a computer-based training course. As its name implies, the training program for the regulatory element will teach you about financial regulations, so that you will remain conversant with current industry standards and practices and the rules that govern them. Ethics and sales practices will also be covered. Because this is a continuing education program and the regulatory portion of the financial field is in a constant state of flux, you will need to take this course again every three years as long as you remain part of the program. This will keep your knowledge of the field current and your participation up to date.
FINRA makes available a collection of continuing education resources for the regulatory element at this address:http://www.finra.org/Industry/Compliance/ContinuingEducation/P120266. These include detailed outlines of the regulatory element itself and two catalogs of the FINRA e-learning library, one for firms that belong to FINRA and one for firms that do not.
The Firm Element. The firm element is not for individual investment brokers but for the firms for which they work. It requires that registered firms maintain a formal training program for members of the firm so that they will always be able to remain current with the field. The contents of this program and its progress must be documented, and that documentation must be submitted regularly to FINRA. This is an important part of FINRA’s role as overseer of the investment industry. For the benefit of registered firms, FINRA publishes a Firm Element Advisory (FEA) that can be found at this address:http://www.finra.org/Industry/Regulation/Notices/2010/P121275.
FINRA maintains a Continuing Education (CE) Council that can be contacted via their Web site for anyone who has questions about the continuing education program. In addition, Roni Meikle, FINRA’s Director of Continuing Education can be contacted by telephone at (646) 315-8688.