Investment Banking Sponsorship and New Securities Testing

FINRA released Regulatory Notice 17-30 which outlines the changes made to registration and qualification requirements for representatives, effective October 1, 2018. The change that is the most relevant to Burch & Company and to prospective representatives seeking sponsorship, is the restructuring of current exams, like the Series 79 Investment Banking Representative. There will also be the creation of a new baseline exam, the Securities Industry Essentials Exam.

Securities Industry Essentials (SIE) Exam

This was created in order to minimize repetitious material covered across the Series exams. The FINRA SIE contains 75 questions and is tailored to test a candidate’s “fundamental securities-related knowledge”.  This fundamental knowledge includes knowledge of basic products, the structure and function of the securities industry, the regulatory agencies and their functions and regulated and prohibited practices. Once an individual passes the SIE, they are eligible to take a revised representative-level qualification examination – Series 7, 79, 82, etc.

The revised representative-level qualification examinations will be specific to the daily activities and responsibilities of registered representatives. These exams will be shorter – for example, for the independent Investment Banking Advisor, the Series 79 will have 75 questions as opposed to 175 – and once passed, the representative will be considered fully registered.

Elimination of Registration Categories and Examinations

FINRA has also made the decision to eliminate several registration categories and their respective examinations. The following registration categories will remain in existence: Investment Company and Variable Contracts Products Representative; General Securities Representative; Direct Participation Programs Representative; Securities Trader; Investment Banking Representative; Private Securities Offerings Representative; Research Analyst; and Operations Professional.

The following registration categories will be eliminated: Order Processing Assistant Representative, United Kingdom Securities Representative, Canada Securities Representative, Options Representative, Corporate Securities Representative, Government Securities Representative and Foreign Associate.

Note: Representatives who are registered in these categories prior to October 1, 2018, will be grandfathered by FINRA and will maintain such registrations.

Other Relevant Information

Upon leaving a firm, a representative will have four years to associate with another firm before having to retake the SIE and will continue to have just two years for all other representative-level qualification examinations.

Individuals who are currently registered, as well as those who will register prior to October 1, 2018, will not need to take the revised exams. Those individuals who wish to take an additional representative-level exam after October 1 will only need to take the revised exam.

Example: Investment Banking Representative A has been registered since January 1, 2018 and holds the 63, 7, and 79 licenses. Nothing changes for him on October 1, 2018, because he is grandfathered for those licenses by FINRA. On January 1, 2019, he decides to take the Series 82. Instead of having to pass both the SIE and the revised Series 82, he only has to pass the revised Series 82.

Please note that the NASAA state exams – Series 63, 65, and 66 – are unaffected by this change. Representatives will still need to pass the Series 63 in order to conduct securities-related business.

As we make this transition into the new registration and qualification requirements, we are happy to provide further clarification on Regulatory Notice 17-30. If you would like to advise on institutional level capital raising or securities related M&A and are thinking of getting licensed, feel free to contact us by email or by phone: (816) 842-4660.