Understanding FINRA Licenses: Types, Requirements, and Benefits
FINRA (Financial Industry Regulatory Authority) is a self-regulatory organization that oversees financial institutions and professionals in the United States. FINRA is responsible for enforcing regulations, monitoring compliance, and protecting investors in the financial industry. One of the ways FINRA does this is by issuing licenses to financial professionals, which ensure they have the knowledge and skills to operate within the financial industry. In this article, we will explore the different types of FINRA licenses, their requirements, and how they benefit financial professionals.
Types of FINRA Licenses
FINRA licenses are categorized into two types: the Securities Industry Essentials (SIE) exam and the Top-Off exam. The SIE exam is a basic exam that tests an individual’s knowledge of the securities industry, while the Top-Off exams are more comprehensive, focusing on specific areas of the industry. There are several types of FINRA licenses, including:
Series 6
The Series 6 license allows an individual to sell mutual funds, variable annuities, and other investment products. This license is commonly held by financial advisors and representatives of broker-dealers.
The Series 6 exam is a licensing requirement for individuals who wish to sell mutual funds, variable annuities, and other investment products that are not securities. The exam consists of 50 scored questions and five unscored pre-test questions, and covers topics such as securities regulations, investment products, and customer account registrations. Candidates have 90 minutes to complete the exam, and must score at least 70% to pass.
Series 7
The Series 7 license allows an individual to sell a wide range of securities, including stocks, bonds, options, and other investment products. This license is commonly held by financial advisors and registered representatives.
The Series 7 exam consists of 125 multiple-choice questions and takes six hours to complete. The passing score is 72%. The exam covers topics such as equity and debt securities, investment banking, retirement plans, and regulatory requirements.
Series 9/10
The Series 9/10 license allows an individual to supervise sales activities of other registered representatives. This license is commonly held by compliance officers and branch managers.
The Series 9/10 exams are a licensing requirement for individuals who wish to become general securities sales supervisors. The Series 9 exam consists of 55 scored questions and 10 unscored pre-test questions, while the Series 10 exam consists of 145 scored questions and 10 unscored pre-test questions. The exams cover topics such as regulatory requirements, securities products, and sales practices. Candidates have three hours and 45 minutes to complete each exam, and must score at least 70% to pass.
Series 24
The Series 24 license allows an individual to supervise the activities of other registered representatives, including compliance and sales activities. This license is commonly held by senior managers and executives.
The Series 24 exam is a licensing requirement for individuals who wish to become general securities principals. The exam consists of 150 scored questions and 10 unscored pre-test questions, and covers topics such as securities regulations, sales practices, and supervisory responsibilities. Candidates have three hours and 45 minutes to complete the exam, and must score at least 70% to pass.
Series 63
The Series 63 license allows an individual to sell securities in a specific state. This license is required by most states for individuals selling securities within that state.
The Series 63 exam, also known as the Uniform Securities Agent State Law Exam, is a licensing requirement for individuals who want to become registered representatives in a particular state. The exam consists of 65 scored questions and 10 unscored pre-test questions, and covers state securities regulations and laws, as well as ethical and fiduciary responsibilities of registered representatives. Candidates have 75 minutes to complete the exam and must score at least 72% to pass.
The Series 63 exam is typically taken in conjunction with another securities exam, such as the Series 6 or Series 7, since those exams cover federal securities laws while the Series 63 exam covers state-specific laws. Some states also require additional exams or education beyond the Series 63 exam, so it's important for financial professionals to check with their state securities regulator to ensure they meet all requirements.
Series 66
The Series 66 license, also known as the Uniform Combined State Law Examination, is a requirement for individuals who want to work as both a securities agent and an investment advisor representative. It covers state securities regulations and is often taken in conjunction with the Series 7 exam.
The exam covers topics such as economic factors, investment vehicle characteristics, and portfolio management strategies. The Series 66 exam consists of 100 multiple-choice questions and takes two and a half hours to complete. The passing score is 73%.
All of these exams are computer-based and administered by FINRA-authorized testing centers. Candidates must register for the exams through FINRA's website and pay a registration fee. They are also required to have a sponsoring broker-dealer in order to take the exam.
Passing these exams is a crucial step for financial professionals who want to advance their careers in the securities industry. In addition to meeting the licensing requirements, passing these exams demonstrates a deep understanding of securities regulations and products, as well as the ability to effectively supervise and manage sales activities.
Note: It can take anywhere from a few weeks to several months to obtain a FINRA license, depending on the type of license and the individual's background and experience.
FINRA License Requirements
To obtain a FINRA license, individuals must meet certain requirements, including:
- Age: Candidates must be at least 18 years old to take the SIE exam and at least 21 years old to take the Top-Off exams.
- Sponsorship: Candidates must be sponsored by a FINRA member firm, which is responsible for registering the candidate and ensuring compliance with FINRA rules and regulations.
- Education: There are no formal education requirements for the SIE exam. However, candidates must have a high school diploma or equivalent. For the Top-Off exams, candidates must have a college degree or equivalent work experience.
- Exam: Candidates must pass the appropriate FINRA exam for the license they are seeking. The SIE exam is a basic exam that covers general securities industry knowledge, while the Top-Off exams are more comprehensive and cover specific areas of the industry.
- Background Check: Candidates must undergo a background check, including fingerprinting, to ensure they have not engaged in any criminal activities or unethical behavior.
Benefits of FINRA Licenses
FINRA licenses provide several benefits to financial professionals, including:
- Professionalism: FINRA licenses demonstrate a financial professional’s commitment to the industry and their desire to maintain high ethical standards.
- Credibility: FINRA licenses enhance a financial professional’s credibility with clients and employers, showing that they have the knowledge and skills to provide quality financial advice.
- Career Advancement: FINRA licenses are often required for career advancement within the financial industry. Holding a FINRA license can open up new opportunities for financial professionals to expand their skill set and take on new roles.
- FINRA is a self-regulatory organization that supervises financial institutions and professionals in the United States to ensure compliance with regulations and protect investors.
- There are two types of FINRA licenses: Securities Industry Essentials (SIE) and Top-Off exams.
- The Series 6 license allows an individual to sell mutual funds, variable annuities, and other investment products.
- The Series 7 license allows an individual to sell a wide range of securities, including stocks, bonds, options, and other investment products.
- The Series 63 license allows an individual to sell securities in a specific state.
- The Series 66 license is a requirement for individuals who want to work as both a securities agent and an investment advisor representative.
- To obtain a FINRA license, individuals must meet certain requirements, including age, sponsorship by a FINRA member firm, and education.
- The specific requirements depend on the type of license and the state in which the individual wishes to work.
FAQ
Why do I need a FINRA license?
If you want to work in certain roles in the financial industry, including as a broker, investment banker, or securities trader. It demonstrates that you have the necessary knowledge and qualifications to perform your job.
What are the different types of FINRA licenses?
There are several types of FINRA licenses, including the Series 6, Series 7, Series 63, Series 65, and Series 66 licenses. Each license is designed for a specific type of financial professional and requires different exams and qualifications.
How do I obtain a FINRA license?
You must pass a qualifying exam and meet certain requirements, such as completing a background check and having sponsorship from a FINRA-registered firm.
How much does it cost to obtain a FINRA license?
The cost of obtaining a FINRA license varies depending on the type of license and the associated exam fees. Generally, the fees range from a few hundred to a few thousand dollars.
How long does it take to obtain a FINRA license?
The length of time it takes to obtain a FINRA license depends on several factors, including the type of license and the applicant's qualifications. It can take anywhere from a few weeks to several months.
What happens if I don't renew my FINRA license?
It will expire, and you will not be able to work in the financial industry until you renew it. You may also face penalties or fines for working without a valid license.