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Finra Gets SEC Go-Ahead for New Qualification Exams

By Alex Padalka October 10, 2017

It’s official. The SEC has given Finra the green light to overhaul its competency exam process, according to a press release from the industry’s self-regulator.

The restructured examination program will allow anyone, including people not associated with a Finra-member firm, to take the Securities Industry Essentials test, the regulator’s general knowledge exam, according to the press release. The exam tests fundamentals of the securities industry, such as knowledge of products, the structure of the industry, its regulators and their functions, and prohibited practices, Finra says. Only then, in order to make their registration effective, will individuals be required to take representative-level qualification tests, such as the General Securities Representative (Series 7) exam, according to the press release. Such exams have also been revised, and Finra is eliminating several representative-level categories it says have become outdated or less useful, the regulator says.

Finra’s president and CEO Robert Cook claims in the press release that the overhaul will eliminate redundancies and will make the process of entering or returning to the brokerage business more consistent and uniform. The changes take effect next October, according to the press release.

Robert Cook (Getty)

Separately, Finra has partnered with several other regulators to issue an investor alert urging background checks on financial advisors. Finra, the SEC, the North American Securities Administrators Association and the U.S. Commodity Futures Trading Commission have issued the bulletin for World Investor Week, a new event promoted by the International Organization of Securities Commissions, which took place from Oct. 2 to Oct. 8, according to the publication. The alert urges investors to check investment professionals’ credentials on sites as Investor.gov, SmartCheck.gov and BrokerCheck as a first step to avoid fraud.

In addition, the regulators suggest investors ensure the investment products they’re being recommended are registered on the SEC’s Edgar database. The bulletin also suggests investors take the time to understand all the fees and risks associated with different types of investment products, stay away from “get rich quick” schemes and learn about the benefits of regular investing, diversification and planning for future financial needs.