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FINRA majorly overhauls its Series Exams
Beginning October 1, 2018, FINRA will overhaul the format of its regulatory exams: A new general knowledge exam called the Securities Industry Essentials (SIE) will become a corequisite for the Series 7 (General Securities Representative), Series 79 (Investment Banking Representative) and other Series Exams.
The individual Series Exams will be trimmed down to focus on content specific to the roles relevant to those exams. FINRA is calling the individual Series Exams “top-offs” to the SIE.
The previous FINRA format was often criticized for too much overlap of content across the individual Series exams, and finance professionals looking to remain in good standing found the need to take multiple Series exams inefficient and costly. The new format aims to fix these issues.
|Number of questions||75 (+ an additional 10 unscored but randomly mixed in)|
|Question Format||Multiple choice|
|Exam Location||Prometric Testing Centers; Exam Administered on Computer|
|Prequisite for the following Series Exams||Series 6, Series 7, Series 22, Series 57, Series 79, Series 82, Series 86/87, Series 99|
|Employer Sponsorship||Not required|
|Eligibility||18 years or older|
Below is an overview of the topics (or, for an enthralling read, head to the FINRA site and download the full SIE content outline).
|Sections||Percentage of exam questions||Number of exam questions|
|Knowledge of Capital Markets||16%||12|
|Understanding Products and Their Risks||44%||33|
|Understanding Trading, Customer Accounts and Prohibited Activities||31%||23|
|Overview of Regulatory Framework||9%||7|
Unlike the Series 7, Series 79 or any other Series Exam, you do not need to be sponsored by an employer to take the SIE. FINRA hopes this will encourage students and prospective finance professionals to gain an understanding of basic financial knowledge prior to employment. FINRA has priced the exam accordingly at $60. However, you still need employer sponsorship to take a top-off exam (Series 7, Series 79, Series 6, etc.).
If you take the SIE and don’t find a job at a FINRA-member firm within 4 years, you’ll have to retake the exam. If you join a member firm but leave, as long as you return to a member firm within 4 years, you will not need to retake the SIE. The top-off tests expire two years after a professional leaves the industry.
We’ll refrain from a full assessment until the exam is administered. However, for those considering the SIE as a way to gain financial skills valued by employers, we are skeptical about its usefulness. That’s because unlike financial training that investment banks actively seek out for new hires, the Series exams are widely perceived by employers as irrelevant to a finance professional's day-to-day.
Josh Brown, author of "Backstage Wall Street: An Insider’s Guide to Knowing Who to Trust, Who to Run From, and How to Maximize Your Investments," captured this sentiment well:
The Series 7 exam requires you to memorize enough useless information to get through a 6-hour, 250-question test. Most of the useful calculations one learns for the test are done by computers in the real world, and most of the ethics questions are obvious, making this the most pointless barrier-to-entry exam being given in the United States today. You should meet some of the cavemen I know who’ve managed to pass it.
"Backstage Wall Street," McGraw-Hill
Since the SIE appears to be a watered-down version of the Series 7, students looking to develop and demonstrate mastery over financial concepts are for now far better off seeking any of the following resources:
Preparing for the SIE
Given that the exam is far shorter and focuses on basic industry knowledge, we suspect it will basically be a Series 7 “light.”
FINRA has not yet administered the SIE, nor have they provided a passing score, so a full discussion on how to prepare is premature. However, we can see from FINRA's SIE content outline that there appears to be significant overlap with the previous Series 7. Given that the exam is far shorter and focuses on basic industry knowledge, we suspect it will basically be a Series 7 “light.” If that turns out to be the case, SIE exam prep will likely be a mercifully shorter version of Series 7 exam prep.
SIE training providers
There are several Series Exam training providers. Below, we list the largest Series 7 training providers, who we suspect will soon become the leading SIE training providers. (We will be updating this list with prices and more details once the providers make their SIE study materials available.):
Impact on Series 7
The Series 7 is the most widely administered FINRA exam. The pre-SIE Series 7 was a 6 hour, 250 multiple-choice question exam that covered general financial knowledge as well as product-specific knowledge. With the SIE, instead of just taking the Series 7, you will need to pass both the SIE and a new, shortened version of the Series 7. The Series 7 will now be 3 hours and 45 minutes long with 125 multiple choice questions. The new exam places greater focus on product-specific knowledge. Learn more about the
Impact on Series 79
The Series 79 is the Series exam for investment banking professionals who exclusively engage in advisory services to corporations. Similar to the Series 7, it will be shortened and become a corequisite (“top off”) to the SIE. It will go from a 5-hour, 175 question multiple choice exam to a 2 hour, 30 minute exam with 75 multiple choice questions.
Learn more about the
The Series 63 requirement
Most states (including New York) require any professionals who carry the Series 7 and several other Series exams licenses to also pass the much easier and shorter Series 63 Uniform Securities Agent license (or the Series 65 or Series 66, depending on their roles).
So an investment banker practicing in New York will likely need to take the SIE, the Series 79 (or Series 7) and the Series 63.
The transition period
New hires in the summer of 2018 should take extra care to pass their Series exams, because after October 1, 2018, they’ll have to take the SIE. Per FINRA:
Individuals who apply for registration as a representative prior to September 30, 2018, will be required to pass the current representative-level exam appropriate to that registration category, not the revised version. In addition, such individuals will not be required to pass the SIE in order to register as a representative.
However, if such individuals fail to pass the current representative-level exam and the next eligibility date for retaking the exam is on or after October 1, 2018, they will be required to pass the SIE and the revised representative-level qualification exam in order to register as a representative. Such individuals may take the SIE and the revised representative-level exam at the next available date on or after October 1, 2018. These individuals would not have to wait the requisite period for retaking a failed exam because the SIE and the revised representative-level exams are different exams than the current representative-level exams.
Below is FINRA’s breakdown of all the Series Exams that are becoming top-offs to the SIE.
|Registration Categories||Before October 1, 2018||On or After October 1, 2018|
|Investment Company Representative (IR)||Series 6
|SIE +||Series 6
|General Securities Representative (GS)||Series 7
|SIE +||Series 7
|DPP Representative (DR)||Series 22
|SIE +||Series 22
|Securities Trader (TD)||Series 57
|SIE +||Series 57
|Investment Banking Representative (IB)||Series 79
|SIE +||Series 79
|Private Securities Offerings Representative (PR)||Series 82
|SIE +||Series 82
|Research Analyst (RS)||Series 7 + Series 86 + Series 87
250 Questions + 100 Questions + 50 Questions
|SIE +||Series 86 + Series 87
100 Questions + 50 Questions
|Operations Professional (OS)||Series 99
|SIE +||Series 99
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