Close Close

Regulation and Compliance > Federal Regulation > FINRA

FINRA Floats Plan to Streamline Competency Exams

Your article was successfully shared with the contacts you provided.

The Financial Industry Regulatory Authority said Thursday that it has filed a proposal with the Securities and Exchange Commission to streamline competency exams and facilitate opportunities for professionals seeking to enter or re-enter the securities industry.

“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,” said FINRA President and CEO Robert Cook, in a statement. “It would also provide enhanced flexibility and efficiency in our qualifications programs, while maintaining important standards and investor protections.”

FINRA rules currently require individuals who work for a FINRA-regulated firm in various capacities to demonstrate their qualifications by passing specific exams.

These individuals must be associated with a FINRA-regulated firm to be eligible to take FINRA qualification exams. In 2016, FINRA said that it had more than 90,000 representative-level exam candidates.

FINRA proposes to revise its current exam structure to eliminate “duplicative testing and barriers to demonstrating and maintaining qualifications.”

The proposed changes would make it easier for an individual with no prior securities industry experience – whether an investor, a recent college graduate or a professional seeking a second career – to take a general knowledge exam called the Securities Industry Essentials.

Individuals who wish to enter the industry are also required to pass a second, more specialized knowledge exam, and must be associated with and sponsored by a firm, FINRA explains.

Also, individuals who transfer to a financial services affiliate of a firm may qualify for a waiver that allows their credentials to be reinstated, should they return to the industry within a seven-year period and meet the requirements of this waiver program.

The plan, according to FINRA, specifically requires the following:

  • Representative-level registrants will take the SIE and then choose tailored, specialized knowledge exams for their desired registered role. This model will eliminate duplicative testing of general securities knowledge on exams.
  • Individuals who do not work for a FINRA-regulated firm, including members of the general public, may take the SIE. This change will provide individuals the flexibility to demonstrate their knowledge of the securities industry and its regulatory requirements before joining a FINRA-regulated firm, as is currently required.
  • Individuals in good standing who transfer to a financial services affiliate of a firm can return within seven years without retaking their qualification exams, provided they complete securities industry continuing education and have no disclosable adverse events. Currently, if an individual is registered and transfers to a financial services affiliate for two or more years, the individual’s qualification expires and the individual must retake an exam to be requalified.
  • Any individual associated with a firm may obtain and maintain any qualification and registration permitted by the firm. This change will allow registered personnel to demonstrate proficiency for new roles in a firm and help firms better manage unanticipated needs for registered personnel by allowing them to maintain a roster of registered employees available to meet those needs.

— Check out FINRA to Get Back to Basic ‘Blocking and Tackling,’ New CEO Says on ThinkAdvisor.