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Steps to Earning Your Licenses
Step 1: Get to Know FINRA and NASAA—If You Haven’t Already
Financial Industry Regulatory Authority (FINRA) is the organization in charge of securities licensing and requirements, and it also administers most of the exams you’ll need to pass to get your license. FINRA also keeps all securities licensing records, writes and enforces rules governing the activities of broker-dealers, audits firms for compliance with those rules, fosters market transparency, and educates investors.
North American Securities Administrators Association (NASAA) is the association of state securities administrators who are charged with the responsibility of protecting consumers who purchase securities or investment advice. Its members participate in enforcement actions and share information, and it also coordinates training and education for state, district, provincial, and territorial securities agency staff. NASAA oversees the licensing requirements for three of the required securities license types.
It’s important to get to know these organizations and keep up with their activities. For example, effective October 1, 2018, a new exam and licensing structure from FINRA will go into effect. The updated structure adds a new exam—the Securities Industry Essentials (SIE) exam—which anyone who wants to earn their first license after that date will have to pass. After passing that exam, the individual licensing exams will be considered “top-offs” and apply directly to the securities license you want to hold. The good news is that you don’t have to be registered or sponsored by a brokerage firm to take the SIE exam.
Step 2: Determine Whether You Should Take the SIE Exam
If you plan to earn a Series 6, Series 7, Series 79, and Series 99, you will also have to pass the SIE. These individual licensing exams are considered “top-offs” and apply directly to the securities license you want to hold. The good news is that you don’t have to be registered or sponsored by a brokerage firm to take the SIE exam. You may also take it while still in school. The other good news is that if you prefer, you can take your "top-off" exam first, if you wish, and the SIE afterwards.
Step 3: Determine Which Securities License or Licenses You’ll Need
You can’t sell securities at a brokerage firm without being licensed. The types of licenses you’ll need depend on the brokerage that’s hiring or sponsoring you. Most of those who hire or train new advisors will have a mandatory licensing program included in their training package, and almost all firms mandate which securities licenses must be obtained to sell the company's products and services. If you intend to be a Registered Investment Advisor or an independent broker-dealer, you’ll also need to be licensed.
Here’s a rundown of the most common FINRA and NASAA securities licenses:
- Series 6: If you want to sell mutual funds, variable annuities, and other investment packages, you’ll need this license. Administered by FINRA and known as the limited-investment securities license, the Series 6 license enables you to sell what are known as packaged investment products. If you’re an insurance agent who wants to sell variable products, you’ll also need this license.
- Series 7: If you’d like to be a stockbroker, this is the license for you. Administered by FINRA and known as the general securities representative license, the Series 7 license authorizes you to sell virtually any type of individual security, such as preferred stocks, options, bonds, and other individual fixed income investments—plus all forms of packaged products. Basically, this license enables you to sell everything except commodities futures, real estate, and life insurance.
- Series 3: If you want to sell commodity futures contracts, you need the Series 3 license, also administered by FINRA.
- Series 31: If you want to sell managed futures, which are pooled groups of commodities futures, you’ll need the Series 31 license, an offshoot of the Series 3 license.
- Series 63: If you have a Series 6 license or a Series 7 license, and you want to do business as a stockbroker or sell mutual funds in any state, you need this license. Administered by NASAA, Series 63 is known as the Uniform Securities Agent license.
- Series 65: If you want to be a financial planner or advisor who works for an hourly fee rather than a commission, or you want to be a stockbroker or other financial representative who deals with managed-money accounts, you’ll need this license. It’s also administered by NASAA.
- Series 66: If you have a Series 7 license, you have already answered a good portion of the Series 65 exam, so instead of earning Series 63 and Series 65 separately, you can choose to hold this license instead.
- Series 79: If you want to offer advice or facilitate debt or equity offerings (public or private), mergers or acquisitions, tender offers, final restructuring, asset sales, and divestitures or corporate reorganizations, you’ll need this license.
- Series 99: If you plan to be a senior manager or a supervisor in operations or will have the authority to materially commit capital in various back office functions, you need this license.
These are the most common securities licenses. You can find a more comprehensive list at the FINRA and NASAA websites. Keep in mind that to earn some of these licenses, like the Series 6 and Series 7, you will need to be sponsored by or work for a broker-dealer.
Step 4: Study for and Take the Exams—and Pass
To earn your Series 6, 7, 22, 57, 79, 82, and 99 license, you’ll need to pass the SIE exam and take the FINRA “top-off” exam for each license type. FINRA says that the exams are "corequisites," but that does not mean you have to take both at the same time. Instead, they mean that you can't earn your license without taking both, and you can take them in any order.
The licensing exams are not exactly a walk in the park. You need to study with purpose and planning. To help you out, many retail brokerage firms have an in-house training program or, in some cases, they have an agreement with an external training provider. Exam preparation and review courses go a long way toward helping you pass your exams the first time.
FINRA makes it easy to enroll for your exams, because they also administer the exams for your NASAA licenses. Simply visit this page.
When you have completed an exam, the computer screen will indicate whether you’ve passed or failed the exam. It also presents a score profile that shows your performance based on the job responsibilities covered by the exam. The percentage required for passing varies. To pass the Series 7, 63, and 65 exams, you need a score of 72%. To pass the Series 66, you need a 73%. You should research your particular exam to find out what the passing score is, because it can change.
After you pass your licensing exams, you’ll have to register your licenses with FINRA and an approved broker-dealer, who will hold your securities licenses and oversee your business for a portion of the commission income. If you intend to be a Registered Investment Advisor, you don’t have to be associated with a broker-dealer. However, you must register with the state you are doing business in if you’re managing assets that are less than $100 million or with the SEC if they are more than $100 million.
Ready to Go?
Visit the PIAK Securities Licensing Portal
For more information visit the Securities Division - Kentucky Department of Financial Institutions