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The Financial Industry Regulatory Authority (FINRA), a US self-regulatory organization (SRO), said it has proposed to the US Securities and Exchange Commission (SEC) the introduction of streamlining competency exams for professionals seeking to enter or re-enter the securities industry. The move aims to facilitate securities market participants and to expand the industry entry opportunities.
Currently, FINRA requires individuals who work for a FINRA-regulated firm to pass specific exams. Those who transfer to a financial services affiliate of a firm may qualify for a waiver that allows their credentials to be reinstated, should they return to the industry within a seven-year period and meet the requirements of this waiver program.
The latest proposals will eliminate duplicative testing and barriers to demonstrating and maintaining qualifications.
“This new approach would give individuals seeking to enter the securities industry the opportunity to demonstrate a fundamental knowledge of regulatory requirements prior to joining a firm, potentially providing firms a larger pool of qualified candidates,” said FINRA President and CEO Robert W. Cook. “It would also provide enhanced flexibility and efficiency in our qualifications programs, while maintaining important standards and investor protections,” he added.
The proposal’s specific requirements include:
- Representative-level registrants will take the SIE and then choose tailored, specialized knowledge exams for their desired registered role. This model will eliminate duplicative testing of general securities knowledge on exams.
- Individuals who do not work for a FINRA-regulated firm, including members of the general public, may take the SIE. This change will provide individuals the flexibility to demonstrate their knowledge of the securities industry and its regulatory requirements before joining a FINRA-regulated firm, as is currently required.
- Individuals in good standing who transfer to a financial services affiliate of a firm can return within seven years without re-taking their qualification exams, provided they complete securities industry continuing education and have no disclosable adverse events. Currently, if an individual is registered and transfers to a financial services affiliate for two or more years, the individual’s qualification expires and the individual must re-take an exam to be re-qualified.
- Any individual associated with a firm may obtain and maintain any qualification and registration permitted by the firm. This change will allow registered personnel to demonstrate proficiency for new roles in a firm and help firms better manage unanticipated needs for registered personnel by allowing them to maintain a roster of registered employees available to meet those needs.
Once the proposal is filed with the SEC, it is to be reviewed by the regulator. Additional canes may be made if it is not fully consistent with the requirements of the Securities Exchange Act. The SEC then publishes the proposal for public comment for a period of 21 days.
The ongoing FINRA reforms are part of a wider-scale strategy initiated by the authority’s head, aiming to evaluate various aspects of FINRA’s operations and programs. Recently the FINRA addressed the challenges that market participants could face from the adoption of Blockchain technology in the securities industry. It also proposed regulatory changed concerning the financial exploitation of senior citizens and other vulnerable adults via financial schemes.
FINRA is an independent entity that acts as a SRO. It regulates all securities firms doing business in the US in every aspect of business – from registering industry participants to examining them, writing and enforcing rules, and informing and educating the public. In addition, the association provides surveillance and other regulatory services for equities and options markets. It also takes on other responsibilities, such as administering the largest dispute resolution forum for investors and firms.