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Why 18-Year-Olds Can Now Sit for Industry Qualification Exams

By Crucial Clips     June 19, 2019
The following text is a transcript of a portion of a speaker's presentation made at an industry conference or during an interview. This transcript solely represents the view of the individual who spoke, and not the view of Financial Advisor IQ or any other group.
Source: FINRA 2019 Annual Conference, May. 15, 2019 

RITA RAAGAS DE RAMOS, SPECIAL PROJECTS MANAGER, FINANCIAL ADVISOR IQ: Hi. I'm Rita Raagas De Ramos from Financial Advisor IQ. And with me is Joe McDonald, senior director of qualifications and exams at FINRA. Joe, FINRA introduced the Securities Industry Essentials exam in October of last year, which is now part of the requirements for getting an industry license. With this exam, anyone who is 18 years old and above can take the exam. And this person doesn't have to be employed by a FINRA member firm and doesn't have to have prior working experience. Can you tell us why FINRA decided to create this exam?

JOSEPH MCDONALD, SENIOR DIRECTOR, QUALIFICATIONS & EXAMS, FINRA: Sure. There's a few reasons for this. One is that we got a lot of feedback from individuals and people within the industry that they wanted to be able to show firms before they actually go for a job interview that they have passed an exam, they have knowledge about the securities industry, and we thought that this would be a way to do that. In addition, we wanted to consolidate the basic or fundamental knowledge about the securities industry in one exam. Previously, we had it in a number of exams with a bit of redundancy. This really kind of focuses on that one exam that is now the SIE.

RITA RAAGAS DE RAMOS: Can you tell us what this exam measures or tests? And can you also tell us how this works with the other examination requirements that FINRA has?

JOSEPH MCDONALD: Sure. The SIE exam is really about the fundamentals about the industry. So we're talking about all the various security products that one might be working with. It would be about the market structure of the industry. It would be about the rules and regulations, both with FINRA and the SEC, that one needs to know if they're working in there, and also about those things like insider trading and other prohibited activities that individuals really shouldn't be engaging in.

Now, the SIE is actually the first of two steps: one or two exams that one would take to become a registered person. So, for example, if you wanted to become a sales rep, which people talk about as the Series 7 exam, an individual would take the SIE exam and then follow it up by taking the Revised Series 7 exam to get their Series 7 or their general securities rep registration.

RITA RAAGAS DE RAMOS: What's the response that you've received ever since you introduced this examination? Can you tell us how many have taken the exam or what kind of feedback you've received from the industry?

JOSEPH MCDONALD: Sure. We've gotten a lot of good feedback. So first of all, you asked about, well, who's taking the exam? We have about 52,000 individuals who have signed up to take the exam as of the end of April of 2019, and about 35,000 of them have actually taken the exam itself.

Now, firms are talking about this very positively because they're starting to catch on to the idea that individuals might be coming to them by having taken the exam. And from the student and the mid-career-type of individuals, we're also getting a lot of positive feedback because they're saying, well, this is great. I can take this exam. I can now go in, and it's on my resume. I'm going to have a leg up compared to the next person who might want a job in one of our FINRA member firms.

RITA RAAGAS DE RAMOS: Were you satisfied with this response that you received? Or did you expect more than that? Or is this more than what you expected?

JOSEPH MCDONALD: I think this is actually about what we expected. Our folks there at the office had done some modeling on what we expected to see, and this is about the sweet spot. We're actually very happy with it because it is what we had hoped it to be. And we're hoping that as we go forward with this and as more learn about it that it will even become more popular.

RITA RAAGAS DE RAMOS: Do you have any data on how many of these people who took that exam are now employed in the industry?

JOSEPH MCDONALD: Many of the individuals are taking [it] and they're being sponsored by firms, so we know that they're coming into the industry. But we know a number of others are taking the exam and probably thinking about sometime in the future that they want to get a job, maybe a year or two, or even three or four years from now, since the exam is actually good for four years. So I think it's a little bit early to kind of be able to come up with too much specific data on that. But we do know that this is starting to happen.

RITA RAAGAS DE RAMOS: That's a good point to emphasize, that the exam is not good for just one year but, as you said, four years.

JOSEPH MCDONALD: That's right. It's good for students because, as a junior, you might take the exam associated with maybe a finance class that you're taking. And two or three years later, you're now ready to get a job with a FINRA member. Or you might be a mid-career-change person that is thinking about coming into the industry, and it's going to take a little time before you're actually ready. First thing you might do is study for and pass the SIE exam. And then two years, maybe even close to four years, then you're still able to go to the member firm, that exam is good. And you only have to take the 7 or the following exam to become registered.

RITA RAAGAS DE RAMOS: What feedback are you getting from the broker dealer firms? Has this exam influenced in any way their hiring process?

JOSEPH MCDONALD: Yeah. Some firms are actually starting actually a little bit quicker than we thought. They're starting to say, you know, we'd like to actually see applicants who have taken the exam prior to actually coming to us with their resume. Other firms are instituting or putting it into their interim program, so during the summer, students will come in and they're going to have them take the SIE exam while they're there.

And then still other firms, because you can take the SIE exam even when you're working for a firm without kind of going through the Form U4 process, the registration process, they're saying, well, we'll have them take the SIE exam first. And then if they pass that, we'll move on to the more formal registration process to get them fully registered. So from all those different areas, we're seeing firms kind of taking different approaches, and we're probably going to be modifying that as we go forward and the exam becomes more popular and well-known, both within the industry and then within the general population.

RITA RAAGAS DE RAMOS: Can we expect more changes to the exam requirements? For instance, I know that the Series 7, you shortened the questions by half.

JOSEPH MCDONALD: Right. So this was all about the representative-level exams. We have a whole other set of exams, the principal-level exams. And that's our next effort to take on is to look at that and see if we can reduce redundancy that is between the rep-level exams and the principal-level exams and, also, come up with a new exam kind of approach that will make more sense for the years to come rather than the years past. And we'll be seeing something about that in the next year or two.


JOSEPH MCDONALD: You're welcome.