Examination Restructuring

Effective October 1, 2018, the SEC is restructuring the representative-level qualification examinations by creating a general knowledge examination called the Securities Industry Essentials (“SIE”) and transforming the representative-level examinations into specialized knowledge exams.

What does this mean?

All new representative-level qualification applicants are required to pass the SIE (75 questions) and a revised-level qualification exam, appropriate to their job functions at the Firm. Individuals can still apply to register as representatives between now and September 30, 2018 and will not be required to pass the SIE. However, if the individual fails and the next retake is after October 1, 2018, they will be required to pass the SIE and the revised representative-level qualification exam.

Who does this effect?

Individuals applying for registration with FINRA as a representative must pass the SIE and the applicable representative-level qualification exam. Individuals who were terminated between October 1, 2014 and September 30, 2018 but since re-registered as a representative within four years from the date of their last registration, will be considered to have passed the SIE. Further the representative level registrations continue to be subject to a two-year lapse, while the SIE is subject to a four-year expiration period.

This change also allows individuals who are not associated persons of Firms, such as members of the general public, to be eligible to take the SIE. FINRA is creating an enrollment system separate from the CRD system to allow these individuals to enroll and pay the SIE fee.

Principal Financial Officer and Principal Operations Officer

Additionally, on October 1st, FINRA will require Firms to designate a Principal Financial Officer and a Principal Operations Officer. A Principal Financial Officer is responsible for financial filings and the related books and records and a Primary Operations Officer is responsible for the day-to-day operations of the business, including overseeing the receipt and delivery of securities and funds, safeguarding customer and firm assets, calculation and collection of margin from customers and processing dividend receivables and payables and reorganization redemptions and those books and records related to such activities.

This requirement applies to all firms, including those currently exempt from the requirement to have a FINOP or an Introducing Broker-Dealer Financial and Operations Principal. These individuals must also be registered in the CRD system as Operations Professionals because their activities and responsibilities intersect with those of covered persons as specified in FINRA Rule 1220(b)(3).

Firms that neither self-clear nor provide clearing services may designate the same person as the Principal Financial Officer, Principal Operations Officer and Financial Operations Principal or Introducing Broker-Dealer Financial and Operations Principal. A Principal Financial Officer or a Principal Operations Officer is permitted to delegate his or her day-to-day duties to other principals at the firm with the understanding that ultimate responsibility for the function rests with the Principal Financial Officer and the Principal Operations Officer.

New Principal Registration Categories

FINRA has established three new principal registration categories: Compliance Officer, Investment Banking Principal and Private Securities Offerings Principal. Individuals who are currently registered in these areas prior to October 1st will automatically be granted registration. Otherwise, representatives will need to complete the SIE and the specialized knowledge exam to perform these roles.

Registration Category Examination Requirement
Chief Compliance Officer Series 14 or SIE and Series 24
Investment Banking Representative SIE and Revised Series 79
Private Securities Offerings Principal SIE and Revised Series 82

Please refer to Regulatory Notice 17-30 and contact an ARG analyst for any questions regarding this matter.