Becoming a financial advisor requires individuals to demonstrate professional knowledge by passing professional examinations.
The Securities Industry Essentials Exam or SIE Exam is the first exam you will take in your path to becoming licensed to sell securities. The SIE Exam covers the basic information you need to know to begin a career in the securities industry.
With study and an understanding of the licensing process, you can begin a rewarding career in securities or insurance.
What is the SIE Exam?
In 2018, FINRA introduced the SIE Exam (Securities Industry Essentials Exam) to test prospective securities professionals on their basic knowledge. The SIE Exam covers the essentials that everyone working with securities should know before starting their career.
The Financial Industry Regulatory Authority, or FINRA, is in charge of the SIE Exam and all other exams that securities and insurance agents take. This non-profit organization is authorized by the U.S. government to regulate the industry, including licensing exams. They work to make sure that professionals have the knowledge they need and that investors can invest with confidence.
FINRA is overseen by the Securities and Exchange Commission, or the SEC, and enforces all federal laws related to securities.
The basic requirements to register for the SIE Exam make it one of the most accessible in the securities industry. Test-takers must be at least 18 years old and have a valid photo ID. The SIE Exam costs $60 and can be taken at any Prometric Test Center or through a firm with access to FINRA’s Central Registration Depository.
The SIE Exam consists of 75 questions that cover the following topics:
- Knowledge of Capital Markets
- Understanding Products (equity securities, debt instruments, and others) and Their Risks
- Understanding Trading, Customer Accounts, and Prohibited Activities
- Overview of Regulatory Framework
Each question has four multiple choice options. Ten additional questions are scattered throughout the test and unscored. Each test-taker answers 85 questions total, with ten of those not contributing to the overall score. You should answer each question, even if you are not sure of the answer.
Test takers have 1 hour and 45 minutes to complete the exam, with an additional 30 minutes designated for a test-taking tutorial before beginning the exam. This helps those unfamiliar with the format learn how the exam will go before their official time begins.
Individual instructions are provided by the testing center but most restrict personal items in the testing room, provide procedures for bathroom breaks, and make special accommodations available if needed. Study sheets and reference materials are not allowed during the test. An exam proctor will check everything that you plan to bring into the testing room before allowing you to begin.
You will receive your test results immediately after finishing the SIE exam, an official copy will be sent to FINRA. Your raw score will be scaled to adjust for slight variations in difficulty between versions of the test. This final score shows whether you passed or failed the test.
A scaled score of 70 is required to pass the SIE Examination. Passing scores are valid for four years.
What do I Need to Know for the SIE Exam?
The SIE Exam covers the basics of the securities industry, so in-depth knowledge is not expected. Focus on basic terminology and federal regulations. An exam outline is available from FINRA that goes over every section of the exam.
When studying for the exam, most people choose to take an online study course. For securities exams, self-paced courses are available, but due to the advanced nature of the material, most choose to enroll in a live, instructor-led class.
The exam tests a combination of understanding how securities are sold as well as regulations that a professional in the investment industry must follow. The SIE Exam focuses on federal regulations while other exams, such as the Series 63, 65, and 66, cover state-specific regulations.
Who Needs to Take the Securities Industry Essentials Exam?
Everyone working with securities needs to take and pass the Securities Industry Essentials Exam. This applies to both financial advisors and those selling insurance. The SIE Exam ensures that every professional has a basic understanding of securities. Those who were licensed before October 1, 2018 do not need to take the SIE Exam as long as they continue to meet the continuing education requirements of their current licenses.
Insurance salespeople are not all required to take the SIE Exam but not becoming licensed in securities will limit their ability to work with clients. Insurance agents who have a securities license are able to provide their clients with the option to invest in products tied to the securities market as part of their retirement and life insurance plan.
How to Become a Financial Advisor or Insurance Salesperson
Becoming a financial advisor or being licensed to sell insurance with securities involves more than completing one exam.
The SIE Exam is only the first professional examination that those working in the securities industry will need to pass. It covers the basic foundation of securities. To become licensed, you will need to pass a more in-depth exam specific to your specialized area. These exams are also regulated and provided by FINRA, with similar testing procedures to the FINRA Security Industry Essentials Exam.
In addition to securities licensing, to become an insurance salesperson or financial advisor you will also need an insurance license. Each state has their own licensing process and exam for insurance agents with different pre-licensing education requirements for each type of insurance: life, health, disability, property, casualty, and others.
Some people choose to take their specialization exams on the same day as their SIE Exam. This can be done at most testing centers through their back-to-back scheduling option.
Tip:StateRequirement recommends that you study for and take one exam at a time. Taking multiple exams on the same day my seem like a way to save time, but a focused approach is the best way to ensure you pass on your first attempt.
While the SIE Exam can be taken before beginning a career in securities, you must be associated with a firm or self-regulatory organization, SRO, to take an advanced qualification exam.
Series 6 Exam
Most professionals new to securities take the Series 6 Exam. It is designed to evaluate entry-level knowledge of an investment company and variable contracts products representative.
The Series 6 Exam consists of 50 questions about federal regulations, centering on mutual funds.
After passing the Series 6 Exam, you will be able to market and sell mutual funds, variable annuities, variable life insurance, unit investment trusts, and municipal fund securities, such as 529 savings plans.
Many bankers and insurance agents start with their Series 6 Exam after passing the SIE. You can even ask your employer to pay for the exam and provide designated time to study for it. After the SIE Exam, this is the most common entry-level exam in the securities industry.
Series 7 Exam
The Series 7 Exam allows you to participate in more securities activities. Like the Series 6 Exam, it can be taken at the same time or after the SIE Exam. It is required for those working as a general securities representative.
The Series 7 Exam has 125 questions and includes additional testing of knowledge of bonds and options. It is designed to be a more comprehensive test and allows those with a Series 7 designation to work with more securities products.
After passing the Series 7 Exam, you will be able to work with public offerings of stocks and bonds, rights, warrants, mutual funds, money market funds, unit investment trusts, exchange-traded funds, real estate investment trusts, mortgage-backed securities, government securities (including repos and certificates of accrual), direct participation programs, securities traders, venture capital, sale of municipal securities, and hedge funds.
Series 63, 65, and 66 Exams
States have their own securities regulations as well. The North American Securities Administrators Association (NASAA), works with FINRA to develop and administer additional tests focusing on state regulations.
The Series 63 Exam, the Uniform Securities Agents State Law Exam, is required by many states for broker-dealer representatives. The Series 65 Exam, the Uniform Investment Advisor Law Exam, serves the same purpose for investment advisor representatives. With the Series 63 designation, you will be able to take and place orders for the sale of securities. The Series 65 designation allows you to advise clients as well.
Some choose to combine both designations and take the Series 66 Exam, the Uniform Combined State Law Examination. For those starting work as a financial advisor, Series 66 is often the best exam to take because it satisfies all requirements.
It is important to note that these exams do not replace the Series 6, Series 7, or any other FINRA exam that you many need.
Other Qualification Exams
There are numerous other advanced exams that those working in the securities industry will need to take and pass, depending on their area of specialization. These include the Series 22 Exam for Direct Participation Program Representatives, Series 57 Exam for Securities Traders, Series 79 for Investment Banking Representatives, and Series 82 Exam for Private Securities Offerings Representatives. Additional exams allow professionals to work in research, regulation, and operations.
Tip:Most insurance salespeople will need, at least, their state insurance license, the Series 6 license, and a Series 63 license to transact a majority of products. Financial advisors will generally replace the Series 6 with a Series 7 license.
Tips for the SIE Exam
Think of the SIE Exam as your foundation for all future work in securities. It is important to master the basics before moving onto specialized knowledge. It is also a great opportunity to demonstrate your knowledge and commitment on your resume before applying to a firm since there is no need to be employed before taking the exam.
Ready to take the next step to becoming a licensed securities professional? The Securities Industry Essentials Exam is the perfect place to start. If you are ready to take and pass the SIE Exam, register with FINRA to schedule your exam today.
Information on this page has been gathered by a multitude of sources and was most recently updated on May 2020.
Any Information on this site is not guaranteed or warranted to be correct, accurate, or up to date. StateRequirement and its members and affiliates are not responsible for any losses, monetary or otherwise. StateRequirement is not affiliated with any state, government, or licensing body. For more information, please contact your state's authority on insurance.
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