The Financial Industry Regulatory Authority (FINRA) is the successor to the National Association of Securities Dealers (NASD). FINRA licenses "registered representatives," colloquially referred to as "stockbrokers." A broker buys and sells stocks on behalf of an investor. Alternatively, a "trader" or "principal" refers to someone who buys and sells stock on their own behalf. Brokers require FINRA registered representative licenses, whereas traders, or principals, require principal licenses. Which license(s) you require will vary, among other things, depending upon your employer, products you intend to market and whether or not you intend to provide investment advice.
FINRA Examination Format
FINRA categorizes its examinations into two categories: registered representatives and principals. FINRA offers 27 registered representative examinations and 14 examinations for registered principals. Each exam is referred to as a "Series" and is classified with an examination number. For example, Series 7 is the basic examination for a registered representative.
Series 7: General Securities Representative Exam (Stockbroker)
This exam, the general examination to become a stockbroker, comprises 250 multiple-choice questions given during a six-hour session. The subjects tested include but are not limited to "corporate securities, municipal securities, municipal fund securities, options, direct participation programs, investment company products and variable contracts," according to FINRA. Most states will not authorize you to serve as a registered representative unless you also have a state license, such as the Series 63, in addition to your Series 7.
Series 63: Uniform Securities Agent State Law Exam
This 60-multiple-choice-question exam lasts 1.25 hours, tests "Blue Sky Laws" and is considered to be the ethical component of the securities examination process. Series 63 covers the state securities laws as reflected in the Uniform Securities Act. Although a Series 7 is required to be a stockbroker, most if not all states require you to pass a state securities exam before you are eligible to be licensed in that state. Series 63 is drafted by the North American Securities Administrators Association (NASAA), not FINRA.
Series 65: Uniform Registered Investment Adviser Law Exam
The Series 65 exam consists of 130 multiple-choice questions and lasts three hours. The exam tests requirements to qualify as an investment adviser representative, and like Series 63, is drafted by NASAA, not FINRA.
Series 4: Registered Options Principal Exam
With 125 multiple-choice questions given in three hours, the Registered Options Principal Exam tests options trading, regulations on trading options contracts, rules of exchanges and the Options Clearing Corporation.
Series 24: General Securities Principal Exam
The General Securities Principal Exam comprises 150 multiple-choice questions given over 3.5 hours. Series 24 tests an individual's ability to manage and supervise investment banking operations, direct participation programs and investment company products/variable contracts.
Chloe began her writing career in 2001 by creating a newsletter for her company. Later, she served as an editor for the "Business Law Journal." She is an avid academic, amateur chef and technophile, and has a Bachelor of Arts degree in economics with a minor in art history from the University of California.