Broker-dealers are flooding the Financial Industry Regulatory Authority with questions about the upcoming restructuring of the self-regulator’s competency exam program, which takes effect Oct. 1.
FINRA recently released FAQ guidance on its qualification and registration requirements as set forth in Rules 1210 through 1240.
The broker-dealer regulator is creating a Securities Industry Essentials (SIE or Essentials) exam and revising the rep-level exams.
FINRA announced last July that the Securities and Exchange Commission approved the rule change, intended to streamline competency exams to, in part, facilitate opportunities for professionals seeking to enter or re-enter the securities industry.
Robert Cook, FINRA’s president and CEO, said last year that the new exam 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.”
He added that the new structure “would also provide enhanced flexibility and efficiency in our qualifications programs, while maintaining important standards and investor protections.”
As FINRA explains, during the transition period, those applying for registration as a rep prior to Sept. 30 will be required to pass the current rep-level exam “appropriate to that registration category, not the revised version.”
Further, those individuals will not be required to pass the SIE in order to register.
However, if such individuals fail to pass the current rep-level exam and the next eligibility date for retaking the exam is on or after Oct. 1, they will be required to pass the SIE and the revised rep-level qualification exam in order to register.
FINRA’s FAQ is broken into five sections: Former, Current and Future Registrants; Permissive Registrations; Financial Services Affiliate Waiver Program; Principal Financial Officer and Principal Operations Officer; and Registered Persons Functioning as Principals for a Limited Period.
One brokerage firm posed this question to FINRA regarding the waiver requirements.
FIRM: An individual who has been registered with our firm as an investment company and variable contracts products representative for the past 10 years will be fully transferring to our banking affiliate in California in January 2020. He is planning to travel for a year before joining our affiliate. Can we terminate his registration in January 2019 and designate him as eligible for the financial services affiliate waiver program?
FINRA: No. As stated in Regulatory Notice 17-30, to be eligible for the waiver program, FINRA requires individuals to start working for a member’s financial services affiliate promptly and in no event later than 30 calendar days after the member has terminated the individual’s registration.
Another firm probed FINRA on permissive registrations.
FIRM: An individual registered as a research principal and working in our research department will be fully transferring to our parent company, a broker-dealer in Germany, at some point after Oct. 1, 2018. Can we permissively maintain the individual’s registration as a Research Principal while the individual is working for our parent company?
FINRA: Yes. As was the case prior to Oct. 1, 2018, a firm may permissively register or maintain the registration(s) of individuals engaged in the investment banking or securities business of a foreign securities affiliate or foreign securities subsidiary of the firm. However, individuals who are permissively registered are considered associated persons, as well as registered persons, and subject to all FINRA rules, to the extent relevant to their activities.