FINRA Proposes New Exam - What Are the Implications?

Originally published on Complinet Inc. is a division of Thomson Reuters.

Oct 21, 2010, 11:11 ET from Patten Training & Review LLC

THE WOODLANDS, Texas, Oct. 21 /PRNewswire/ -- According to Deirdre Patten of Patten Training & Review LLC, one thing is for certain: in the wake of the new financial reform bill, coupled with the recent plethora of Ponzi schemes, is that we will see more regulation, not less.  This is evidenced by the proposed new registration—New Qualifications Exam for Operations Professionals requirement. This registration is designed for individuals supervising operational functions at a broker/dealer, including stock loan, prime brokerage, client on-boarding, receipt and delivery of cash and securities, and account transfers, just to name a few. The proposal allows for an opt-in provision enabling certain individuals already registered as either Series 6, Series 7, Series 17, Series 37/38 and most Principals to qualify without taking the exam.



According to FINRA Regulatory Notice 10-25, the overall theme of the exam would be based on the following:

  1. Professional Conduct and Ethical Considerations.
  2. Essential Product and Market Knowledge for an Operations Professional.
  3. Knowledge Associated with Operations Activities.

Though the total number of effected professionals is unknown, it is estimated to be quite large.  Many firms have already registered various operations professionals.  However, the definition of who is covered by this proposed exam is unclear.   "We, as a licensing and registration education organization, recognize the impact the introduction of this exam will have on the registration units of broker/dealer firms," said Margie Webber, immediate past president of the Securities & Insurance Licensing Association (SILA).  "Not only do firms have to figure out who needs to actually take the exam, they will be faced with the added expense and labor associated with the initial Form U4 filing processes.  In addition, the ongoing maintenance of the increase in registered personnel will be costly on a long-term basis and taxing to the registration personnel of broker/dealer firms."

In addition to the qualifications exam, the proposed rule would incorporate continuing education requirements for operations professionals. Many firms question the validity of imposing this new registration exam, but support the concept of further education for their staff. One such firm is United Planners. Deirdre Patten had the opportunity to speak with Doug Hall, Chief Compliance Officer of United Planners, on this topic.  Doug felt that it would make more sense to formulate an ongoing training program designed with more practical applications based on a best practices model. Doug's concerns were reflected throughout the comment letter and focused around clarifications such as:

  • What level of management and which effected department would be required to take the exam?  
  • What if the firm outsourced some of the functions (who would be responsible)?
  • Will exemptions exist for introducing firms in areas where their clearing firm has met the qualifications?  

Thomas Sargant, President of Regional Municipal Operations Association, had a different perspective.  "I believe that the new exam would give the operations professionals in the industry the credibility they deserve.  This group of professionals has historically been overlooked.  However, they are an integral part of any firm's success and by including the additional credentials, the operations professionals who take and pass the exam would get the recognition that they deserve." Additionally, Thomas supports FINRA's ongoing efforts to fine-tune the proposal and applauds their willingness to include all interested parties. His final comment addressed the cost of the proposed exam and continuing education. Thomas hopes that FINRA keeps the price low to encourage a broader participation from FINRA member firms. The Regional Municipal Operations Association is a 100% voluntary organization that believes their strength is derived from the combined wisdom of the membership that accepts the responsibility to teach as well as learn.

Although the new registration exam appears to be imminent, there are additional unintentional consequences raised in the firms' comment letters.  One of these comments relates to many operations professionals that may choose not to take the exam or possibly have difficulty passing it.

In summary, it is clear that all parties have the right intent, but the question still remains, "Is this proposed exam really in the best interest of the investing public if we lose some of our most experienced professionals?"

Deirdre Patten, Patten Training & Review LLC, started her career in 1983, specializing in training and compliance for the financial services industry. Over the past 27 years, she has worked with thousands of financial services professionals to help them successfully obtain their securities qualification exams. She currently teaches all FINRA, NYSE, MSRB, NFA and NASAA series exams, in addition to providing regulatory compliance solutions. website:


Deirdre Patten

Patten Training & Review LLC

Office: 281-419-6030

SOURCE Patten Training & Review LLC