State Securities Law Exams
Series 63 - Uniform Securities Agent State Law Examination
In most states, a new registered representative must - at a minimum - pass the Series 63 to satisfy state law registration requirements. The exam focuses on the registration of persons and securities under the USA and ethics in the securities industry.
Series 65 - Uniform Investment Adviser Law Examination
The Series 65 was the first examination created by NASAA to test the competency of individuals who wish to provide fee-based investment advisory services. At the time, it focused primarily on the Uniform Securities Act, NASAA amendments and ethical practices in the securities industry.
The Series 65 exam underwent a dramatic change that became effective in 2000. In addition to questions about the USA and ethics, the Series 65 exam includes questions on the subjects of economics, investment vehicles, investment strategies, analysis, and ethics.
Currently, the majority of those who take the Series 65 are either securities professionals who have not passed the Series 7 General Securities Representative Exam, or those in related fields within the financial services industry - such as accountants - who wish to be in the business of providing investment advice for fees. This includes, of course, those who work for investment advisory firms and wish to become IARs.
Series 66 - Uniform Combined State Law Examination
The Series 66 exam is relatively new. It was created by NASAA in response to requests from broker-dealers and other financial services firms. It is essentially a combination of Series 63 and Series 65, but since a prerequisite for taking the Series 66 exam is successful completion of the Series 7 exam, it does not include the product, analysis and strategy questions that are a large part of the Series 65.
To avoid overlap with the Series 7, NASAA assembled a committee of securities industry experts to eliminate questions in the Series 66 that would duplicate those in the Series 7. As a result, the Series 66 exam is considered by many to be an "easier" test. It will, like the Series 65, qualify the individual to act as an IAR, and it fulfills the requirements of the USA for state registration. Note that candidates can take the 66 or 7 in any order, but both must be completed in order to register.
General Industry/Products Exams
SIE - Securities Industry Essentials Examination
The qualification tests for several occupations in the financial services industry, formerly known as the Series exams, have been streamlined into one initial exam called the Securities Industry Essentials Exam—or the SIE Exam. Candidates can then take an additional "top-off" qualification exam for the specific field they hope to enter.
Series 6 - Investment Company Products/Variable Contracts Representative Examination
Upon successful completion of the Series 6 exam, representatives are qualified to solicit, purchase, and sell certain security products—open-end mutual funds, variable annuities, variable life insurance, unit investment trusts, and municipal fund securities—products commonly sold by financial planners. However, holders of the Series 6 license are not permitted to sell corporate or municipal securities, direct participation programs, stocks, or options. These last require the Series 7 exam.
To conduct business in annuity or insurance products, a representative must also pass a state life insurance examination. Common jobs utilizing the Series 6 license include financial advisors, retirement plan specialists, investment advisors, and private bankers.
The Series 6 exam is broken down into four sections related to job functions:
- Function 1 deals with regulatory fundamentals and business development.
- Function 2 focuses on evaluating customers' financial information, identifying investment objectives, providing information on investment products, and making suitable recommendations.
- Function 3 concentrates on opening, maintaining, closing and transferring accounts and retaining appropriate account records.
- Function 4 centers around obtaining, verifying & confirming customer purchase, & sale instructions.
Series 7 - General Securities Representative Examination
The Series 7 license allows financial advisors to engage in buying and selling virtually all securities-related investment products. In addition to everything covered under the Series 6 exam, products include common and preferred stock, stock options, and bonds. It is the examination required for stockbrokers and is a prerequisite for many other securities licenses.
The Series 7 exam is also broken down into four sections related to job functions:
- Function 1 pertains to seeking business for a brokerage firm from customers and potential customers.
- Function 2 relates to opening accounts after assessing a customer's financial background.
- Function 3 covers information about investments, suitable recommendations, transfers of assets, and record keeping.
- Function 4 relates to doing transactions.
Series 24 - General Securities Principal Examination
The Series 24 is an exam and license entitling the holder to supervise and manage branch activities at a broker-dealer. It is also known as the General Securities Principal Qualification Examination and was designed to test the knowledge and competency of candidates aiming to become entry-level securities principals. Supervisory activities allowed after passing the exam include regulatory compliance over trading and market-making activities, underwriting, and advertising.
The Series 24 exam is administered by the Financial Industry Regulatory Authority (FINRA) and covers topics such as corporate securities, real estate investment trusts, trading, customer accounts, and regulatory guidelines. In order to be eligible for a principal registration, a candidate must pass the Series 24 exam, the securities industry essentials (SIE) exam, and one of the following five representative-level qualification exams: Series 7, 57, 79, 82, or 86/87. Candidates can also pass the Series 24 and Series 16 exams but not the SIE and qualify for the research principal registration.
The Series 24 content is grouped into the five main job functions that a general securities principal engages in regularly at work for a broker-dealer. Those job functions include:
- Supervision of Registration of the Broker-Dealer and Personnel Management Activities: This includes regulatory requirements and exemptions, differences between various registrations, hiring and registration of associated persons, and maintenance of registrations.
- Supervision of General Broker-Dealer Activities: This includes development, implementation, and updating of firm policies; written supervisory procedures; and controls. It also includes supervision of conduct of associated persons; disciplinary action; supervision of compensation; and development, evaluation, and delivery of products and services.
- Supervision of Retail and Institutional Customer-Related Activities: This includes supervision of new account opening and maintenance of existing accounts, as well as monitoring of speaking engagements and other public communication. In addition, it includes the review of transactions, recommendations, and account activity for proper disclosures.
- Supervision of Trading and Market-Making Activities: This includes supervision of order entry, routing, and execution, as well as the proper booking and settlement of trades, and the review of executions for compliance.
- Supervision of Investment Banking and Research: This includes the development and maintenance of policies, procedures, and controls related to investment banking activities and research. It also entails the review and approval of investor disclosures, pitch books, and marketing materials.