This page of our SIE Online Study Guide provides an overview of the SRO regulatory requirements for associated persons, focusing on FINRA and state registrations as well as continuing education.
SRO Qualification and Registration Requirements
Persons and firms engaged in securities business with the investing public are required to register with FINRA. Individuals who get registered are referred to as registered representatives or associated persons and may include a firm’s salespersons, partners, directors, or others. Once registered, associated persons must pass qualification exams prior to actually conducting securities business. Permitted activities will vary depending on which qualification exam is passed; for example, candidates who pass the Series 79 are qualified for debt and equity offerings, mergers and acquisitions, financial restructurings, and more.
Certain individuals are exempt from FINRA registration. They are referred to as non-registered persons and include individuals whose functions are solely and exclusively clerical or ministerial such as providing necessary forms to customers. Failing to register an associated person who should be registered is a serious violation that can result in disciplinary action.
The securities registration process includes some of the requirements below.
- Background Check: Under FINRA supervision rules, member firms are required to thoroughly investigate prospective associated persons prior to submitting their applications for registration.
- Form U4: After a prospective associated person fills out the Form U4 – the Uniform Application for Securities Industry Registration – their member firm will review and make any necessary edits. The member firm will then submit the filing to FINRA on behalf of the prospective associated person.
- Fingerprinting:For purposes of a criminal background check, associated persons are required to submit their fingerprints to FINRA no later than 30 days after their Form U4 is filed. FINRA will then submit the fingerprints to the FBI and make the results available to regulators as well as the employing member.
There are certain events that can disqualify an individual from FINRA registration, known as statutory disqualifications. These include any felony convictions within the past 10 years as well as certain misdemeanors involving money or securities within the past 10 years. Persons subject to disqualification are generally considered ineligible for FINRA membership or association.
State Registration Requirements (Blue-Sky Laws)
Most states require registered representative candidates to take and pass the state securities law examination known as the Series 63 (along with an appropriate qualification exam) in order to sell securities in that particular state. Each state has their own unique set of securities laws and regulations, nicknamed blue-sky laws, though the Series 63 exam is not required by Colorado, District of Columbia, Florida, Louisiana, Maryland, or Puerto Rico.
The securities industry continuing education (CE) program is comprised of two separate and distinct elements. The completion of each element is necessary to maintain an approved status with FINRA; failure to complete will lead to a CE Inactive status during which a registered representative cannot conduct any securities business.
- On an annual basis member firms are required to administer a formal Firm Element training session to keep their registered representatives up to date on current laws and regulations.
- FINRA administers a Regulatory Element training session due within 120 days of the second anniversary of a registered representative’s initial registration date, and every three years thereafter.