Posted by Barb Gavitt, ITP, SILA-F ● October 3, 2017

The Securities Industry Essentials Exam (SIE)

The Securities Industry Essentials Exam (SIE Exam)

It is certainly not “breaking news” that FINRA (Financial Industry Regulatory Authority) will introduce a securities industry general knowledge exam to streamline the qualification exam structure for individuals entering the securities industry.

Currently, an individual interested in working in the securities industry as a registered representative must be associated with a FINRA regulated broker-dealer firm and he or she must be eligible to take, and ultimately pass a required qualification exam. The two qualification exams available for an individual are the Series 6 and the Series 7 exams. The Series 6 exam is the Investment Company and Variable Contracts Products Representative Exam while the Series 7 exam is the General Securities Representative Exam. Both exams require an individual be sponsored by a FINRA member firm before taking the exam.

On March 28, 2017, FINRA filed a proposed rule change with the SEC to adopt rules relating to qualification and registration requirements, restructure the current representative-level qualification exams, and create a general knowledge examination and specialized knowledge examinations. On July 7, 2017, the SEC released the order approving these proposed rule changes.

Once the qualification exam structure for registered representatives is streamlined, FINRA will require individuals who want to enter the industry as a registered representative pass the Securities Industry Essentials Exam (SIE) prior to obtaining a Series 6 or a Series 7 “top-off” exam. Individuals will have the opportunity to study and take the general knowledge SIE exam as a co-requisite without being sponsored by a FINRA member firm. Once the SIE has been successfully passed, the individual must then become associated with a FINRA member firm and pass the additional “top-off” qualification exam to become a registered representative.

During the Securities and Insurance Licensing Association (SILA) National Education Conference held September 24-27, 2017 in Orlando, Florida, representatives from A.D. Banker & Company attended the FINRA Testing and Continuing Education session and obtained important updates regarding the potential timing and implementation for the SIE.

The SIE and the newly revised “top-off” exams for the Series 6 and the Series 7 are expected to be launched in the fourth quarter of 2018. FINRA plans on releasing a Regulatory Notice the first week of October (this week) that will include a communication plan to educate the securities industry regarding the restructure of the Series 6 and Series 7 exams and the SIE. FINRA anticipates the updated content outlines for the SIE, Series 6 “top-off” exam, and Series 7 “top-off” exam, will be filed with the SEC and released by the end of the 4th quarter of 2017. Additionally, FINRA will file the exam fee structure for the exams in early 2018.

The Securities Industry Essentials Exam will contain 75 questions plus 10 experimental (pretest) questions and the individual taking the exam will be given 105 minutes to complete it. The exam will be pass/fail, and although FINRA has not officially decided what the passing score will be, a 70% is most likely. If successful, the student will not receive an actual score, the report will only state that the individual has passed the SIE. If unsuccessful, the score report will include the score along with the diagnostics for each section of the exam. The 30-day retake and three time fail rule will apply to the SIE exam, as it currently does for the other qualification exams.

The Series 6 “top-off” exam will be reduced to 50 questions and the Series 7 “top-off” exam will be reduced to 125 questions. Both “top-off” exams will also include experimental (pretest) questions.

FINRA announced that, as of January 1, 2018, PROMETRIC will be the single vendor for all FINRA administered exams.

With the emergence of the SIE, firms will likely choose among the following three options regarding new hires:

  1. Require applicants to pass the SIE exam BEFORE hired.
  2. Sponsor a new hire to take the SIE exam first, then upon passing, sponsor them to take the “top-off” exam.
  3. Allow new hires to take the SIE and the “top-off” exam on the same day. If the applicant passes the “top-off” and fails the SIE, they will only be required to retake the SIE. There is no required order to pass the SIE and “top-off” exam.

Finally, if a currently registered individual leaves the industry for two years, he or she will be required to pass the SIE and “top-off” exam to get rehired. The SIE will be valid for four years without registration with a FINRA member firm.

Remember to check back with A.D. Banker & Company for updates regarding the SIE and the “top-off” exams on a regular basis. If your firm is interested in speaking with someone regarding the SIE study program with A.D. Banker & Company, please contact us at 1-800-866-2468.

Topics: Prelicensing, Securities, Series 6, Series 7, SIE, FINRA, SILA

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