SEC approves Finra rule to streamline securities exams

Under regulation to become effective next year, college students, career switches can more easily get into brokerage business

Oct 5, 2017 @ 2:04 pm

By Mark Schoeff Jr.

New college graduates and people wanting to change career direction would more easily be able to enter the securities industry thanks to reformed Finra qualifying exams.

The Securities and Exchange Commission has approved a Finra rule to streamline competency tests, the industry funded broker-dealer regulator announced on Thursday. Under the Finra rule, which goes into effect on Oct. 1, 2018, anyone wanting to become a broker can take a general knowledge examination called Securities Industry Essentials before he or she joins a brokerage. In order to become a registered representative, an applicant also would have to pass a specialized knowledge exam, such as the general securities representative Series 7, after they have become affiliated with a firm.

The previous rule required that a person join a firm before sitting for a qualifying exam. The change should open the door to more people who are attracted to the securities industry but are not yet employed in it. For instance, students about to graduate from college could put the SIE on their resumes while job hunting.

(More:Finra seeks to raise pressure on firms hiring rogue brokers, avoiding arbitration payments)

"It makes that individual a more attractive hiring candidate to a firm," said Brian Marks, senior managing director at Knopman Marks Financial Training. "They have raised their hands and enthusiastically shown that they're interested in getting into the securities business."

For professionals in other fields considering a switch to the investment-advice sector, the new exam can help them get a taste for the industry without first having to be hired by a firm. They essentially could take a test drive without having to buy the brokerage car.

"For a career changer, it makes it easier to decide to become a financial adviser," Mr. Marks said.

The SIE covers securities-related basics, such as product knowledge, the structure of the industry, regulated practices and regulators.

The new Finra rule also would allow brokers who terminate their registrations to work for an affiliate bank or firm of their broker to automatically re-qualify for their registrations if they return to their firm. In addition, the rule allows firms to permissively register support staff by letting them take the SIE.

Finra said the exam changes are an example of reform being generated by Finra 360, a self-examination of the broker-dealer launched earlier this year by Finra president and chief executive Robert W. Cook.

(More:Shrinking talent pool puts strain on advisory firms)

"This is an important change based on the need to streamline the examination process and eliminate redundancies in qualification and registration requirements," Mr. Cook said in a statement. "The new structure brings greater consistency and uniformity to the process for entering and returning to the brokerage industry."

Alan Wolper, a partner at the law firm Ulmer & Berne, applauded Finra for rationalizing its exam process, but also he said that it's low-hanging fruit.

"All of the things they've done here are relatively salutary," Mr. Wolper said. "But the cynic in me says, Who was complaining about exams? They've got much bigger issues to deal with in the long term."


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