Friday, March 10, 2017

FINRA’s streamlined exam proposal eases entry into securities business

By Jay Fishman, J.D.

The Financial Industry Regulatory Authority (FINRA) has filed with the SEC a proposal to streamline the competency exam requirement so that individuals may more easily enter and re-enter the securities industry. The proposal would additionally adopt as FINRA rules in the consolidated FINRA rulebook the NASD and Incorporated NYSE qualification and registration requirements. Lastly, the proposal would amend the continuing education requirements. The comment period remains open for 21 days following the proposal’s publication in the Federal Register.

Streamlining competency exams. The main thrust of the competency exam proposal would be to eliminate duplicative testing and make it easier for individuals with no prior securities experience to enter the industry. Currently, individuals must already be working for a FINRA-regulated firm to take the competency exams. As proposed, persons not working in the securities industry such as investors, college graduates or professionals seeking a second career could take a newly created Securities Industry Essentials (SIE) exam to demonstrate general securities knowledge. Thereafter, these persons wishing to enter the industry would need to be associated with, or sponsored by, a firm to take and pass a second exam evidencing their knowledge of the securities specialty they wish to engage in.

The proposal would also change the reinstatement period for individuals in good standing. Currently, if a registered individual transfers to a financial services affiliate for two or more years, the individual’s qualification expires and he or she must re-take the applicable exam(s) to be re-qualified to return. As proposed, individuals in good standing who transfer to a firm’s financial services affiliate can return within seven years without re-taking qualification exams, provided they complete securities industry continuing education and are not subject to disclosable adverse events.

Robert W. Cook, FINRA’s President and CEO, said that “this new approach would give individuals seeking to enter the securities industry the opportunity to demonstrate a fundamental knowledge of regulatory requirements prior to joining a firm, potentially providing firms a larger pool of qualified candidates. It would also provide enhanced flexibility and efficiency in our qualification programs, while maintaining important standards and investor protections.”