Securities Industry Essentials Exam (SIE)

• Implemented to ensure that industry professionals have a broad understanding of fundamentals concepts and rules of the securities industry
• Centerpiece of exam restructuring
  • Reduction in the number of exams
  • Prerequisite for all remaining representative level
• Eligibility
  • Must be age 18 or older
  • No need to be sponsored or associated with a FINRA member broker-dealer
  • Valid for four year
• In addition to the SIE exam, associated persons of the firm will have to pass an appropriate industry-specific exam that relates to their registration category

Associated Persons

• Defined as employees of FINRA member firms (broker-dealers) and include all of the following:
  • Officers, directors, partners, or branch managers
  • Employees (unless the employee’s function is solely and exclusively clerical or ministerial)
  • Person engaged in investment banking or securities business
• Certain associated persons are required to be registered as either representatives or principal

Non-Registered Persons

• Customer contact is limited to:
  Extending invitations to firm-sponsored events
  • Inquiring as to whether a prospective customer wants to speak with a registered person
  • Inquiring as to whether a customer is interested in receiving investment literature 
• Customer orders cannot be accepted
  • Orders can only be accepted and entered by registered persons
  • If an RR is unavailable, a non-registered person can transcribe an order as long as an RR confirms the order with the customer before it’s entered
• Commissions or finder’s fees cannot be paid to non-registered persons

Registered Representatives

Firm Supervision – Principals

• Principals are the individuals who are responsible for managing specific areas of a member firm

Examinations

• Failing an Examination
  • After failing a qualification exam (or the SIE Exam) on the first and/or second attempt, a person must wait 30 days before retesting
  • If the qualification exam (or the SIE Exam) is failed a third time, a 180-day waiting period applies between all subsequent attempts
• Exam confidentiality
  • FINRA considers it a violation to:
    • Remove any parts of the exam from a test center
    • Reproduce parts of an exam
    • Disclose parts of an exam to another person
    • Receive parts of an exam from another person
    • Compromise past or present exams in any way

Written Supervisory Procedures

• A firm’s WSP must be created to ensure oversight of its representatives’ activities in handling customer accounts
• To provide adequate supervision, a firm must establish, maintain, and enforce written supervisory procedures, which include the following:
  • Clear identification of a person’s supervisory responsibilities and the date assigned
  • Procedures for each business line and applicable securities laws for which each supervisor is responsible
  • Approving customer accounts and reviewing them periodically in an effort to detect and prevent abuses
  • Verifying the good character, qualifications, and experience of all persons being certified for registration and monitor their good standing on a continuing basis
• Each registered representative is assigned to a specific supervisor/principal 

Registered Requirements

• Person must be sponsored by a broker-dealer and must file both Form U4 and a fingerprint card with the Central Registration Depository (CRD)
  • You need to be sponsored for Series exam
• Some items contained on Form U4
  • Name (nickname/alias) and address
  • Personal data and identifying information
  • Information regarding any past violations (not limited to past 10 years)

Statutory Disqualification (SD)

• Grounds for statutory disqualification
  • Conviction within the last 10 years of any felony or securities-related misdemeanor
    • Conviction, not arrest
  • Denial or revocation of registration by the SEC or CFTC
  • Expulsion or suspension from membership with any SRO (US or foreign)
  • Omitting a material fact in any application or report to an SRO
  • Maintaining a business relationship with a banned person
• Eligibility proceeding
  • FINRA offers firms an eligibility Proceeding process in order to request permission to either hire or continue to employ an SD person. If permitted, heightened supervisory requirements must be established 

Background Checks and Fingerprinting

• Background Checks
  • FINRA requires firms to perform a search of reasonably available public records
    • Verify the accuracy of the information on the Form U4
    • If registered previously, review the most recent Form U5
      • Provides information regarding the reason for termination from previous firm (including voluntarily leaving)
• Fingerprinting
  • Required for all applicants who are registering with new firm, even if it had been done with a previous firm industry requirement extends to the Operations Area
    • As a general rule, all persons who come into contact with funds, securities, or the firm’s books and records must be fingerprinted 

State Registration (Blue Sky Laws)

• State Registration
  • Registration and examination requirements may also apply on the state level; however, it is dependent on the activities performed by the registered person
    • If required, the person is tested on the Uniform Securities Act (a model law) through an exam that is created by the North American Securities Administrators Association (NASAA)
• NASAA Exams
  • Created three exams (based on model law, not state law)
    • Series 63
    • Series 65
    • Series 66

Continuing Education

• Regulatory Element
  • Applies to all registered personnel; no grandfathering
  • Initially due by December 31 of the calendar year following the year in which a person become registered and by December 31 of every year thereafter
    • If not completed, registration becomes inactive
• Firm Element
  • On-going training directed by the firm
  • Based on needs assessment
  • Training plan must be re-evaluated annually
• RRs serving in the military are exempt from the two-year inactive status limitation that normally applies to registration reinstatement and both elements of continuing education are put on hold

Determine which document or phrase applies

• Describes the responsibilities that a firm must follow to conduct business
  • Written supervisory procedures
• The result of being convicted of a felony of a felony within the previous 10 years
  • Statutory disqualification 
• Document that must be filed with CRD for a person to become registered
  • Form U4
• Must be completed on a person’s second registration anniversary and every three years thereafter
  • Regulatory element