By William R. James, Senior Securities Editor

New Registration Category – Operations Professional

Operations Professionals Summary (FINRA Rule 1230(b)(6))


1. Overview of Operations Professional Classification & Implementation Date

2. Who Must Register

a. Covered Persons

b. Covered Functions

c. 60-day Identification Period

i. Day One Professionals

ii. Non Day-One Professionals

d. 12-Month Transition Period

3. Exam Overview

4. Exam Exemptions


1. Overview of Operations Professional Classification & Implementation Date

Up to now, registration with FINRA has been limited to those persons working in sales and/or trading (front office). Member firms are for the first time being required to identify covered individuals (back office) by October 17, 2011.


FINRA believes registration and qualification requirements for covered persons are needed to help ensure investor protection and the integrity of the marketplace. FINRA Rule 1230(b)(6) is intended to increase covered persons’ awareness and knowledge that they are operating in a regulated environment designed to protect investors’ interests and the integrity of the operations of a broker-dealer.

2. Who Must Register

A. Covered Persons

This new rule covers only senior managers or supervisors in operations, and those who have at their discretion the authority to materially commit capital in various back office functions (See Covered Functions below). Those currently acting in those roles are being referred to as “Day-One” Professionals. 

B. Covered Functions

In identifying Operations Professionals whose supervisory responsibilities require registration in this new category, the following criteria have been provided by FINRA.


Those supervisors who may commit capital and/or have senior management responsibilities over the following functions:


·         Client on-boarding (customer account data and document maintenance);

·         Collection, maintenance, re-investment (i.e., sweeps) and disbursement of funds;

·         Receipt and delivery of securities and funds, account transfers

·         Bank, custody, depository and firm account management and reconciliation;

·         Settlement, fail control, buy ins, segregation, possession and control;

·         Trade confirmation and account statements;

·         Margin;

·         Stock loan/securities lending;

·         Prime brokerage (services to other broker-dealers and financial institutions);

·         Approval of pricing models used for valuations;

·         Financial control, including general ledger and treasury;

·         Contributing to the process of preparing and filing financial regulatory reports;

·         Defining and approving business requirements for sales and trading systems and any other systems related to the covered functions, and validation that these systems meet such business requirements;

·         Defining and approving business security requirements and policies for information technology, including, but not limited to, systems and data.

·         Defining and approving information entitlement policies in connection with the covered functions; and

·         Posting entries to a member’s books and records in connection with the covered functions to ensure integrity and compliance with the federal securities laws and regulations and FINRA rules.


The above list is not exhaustive in terms of who may be required to register and take a test. The announced Series 99 Operations Professional qualification exam study outline has not been published. FINRA has not indicated when candidates and content preparation companies like Kaplan are likely to receive it.

C. 60-Day Identification Period

(i) “Day-One” Operations Professionals

Day-One Operations Professionals must be identified and register as Operations Professionals on or before December 16, 2011. These are people who are currently working in a covered function. They essentially get 60 days to register once identified. Following their registration, Operations Professionals may fully function in that role without passing an examination until the transition period has expired.

(ii) “Non Day-One” Operations Professionals

The 60-day identification period and the 12-month transition period  (see below) to pass a qualification examination only apply to Day-One Professionals. Those who are not subject to the registration requirements for Operations Professionals as of October 17, 2011 (i.e., a person who does not meet the depth of personnel criteria and/or is not engaged in at least one covered function as of the effective date, or persons hired after October 17, 2011, who will be subject to the registration requirements) (non-Day-One Professionals) must register as an Operations Professional and, if applicable, pass the Operations Professional qualification examination (or an eligible qualification examination), prior to engaging in back office activities that require this new registration.


D. 12-Month Transition Period

Once identified and registered, Operations professionals have until October 17, 2012 to pass the Series 99 or some other eligible exam such as the Series 6 or 7. If someone choses to take the Series 7 in lieu of the new Series 99, they must pass that exam in the customary 4-month window rather than the December, 2012 date upon requesting the examination.


Operations Professionals who currently have a Series 6, Series 7, Series 24 or other similar supervisory license are not required to take the new Series 99 exam. Although they may not have to pass the new exam, they must still register as an Ops Pro by filing an amended Form U-4 an “opting in” as an Operations Professional which will be automatically approved, assuming there are no other deficiencies such as fingerprint cards.

3. Exam Overview

The number of questions on the new Series 99 exam and the time to take it is not yet available. FINRA has published only key content themes in three sections.


A. Professional Conduct and Ethical Considerations — Assesses core knowledge of material covered on other FINRA Examinations appropriate for the Operations Professional. It tests knowledge of serious violations of securities industry rules, includes ethics-based questions, and addresses issues such as data integrity, regulatory red flags, and separation of duties.


B. Essential Product and Market Knowledge for an Operations Professional — Assesses basic product and market knowledge, including definitions and characteristics of major product categories (i.e., equities, debt, packaged securities, options, and markets) but does not test at the same level as a person selling products to customers.


C. Knowledge Associated With Operations Activities — Assesses broad-based knowledge regarding the covered functions that support a broker-dealer’s business (i.e., customer account set-up and transfers, record-keeping requirements, rules associated with the protection of customer assets and transaction processing, uniform practices associated with making good delivery of securities, making payments for securities and meeting settlement requirements, credit and margin rules, and how to obtain supervisory approval for any of the above).

4. Exemptions


Persons who hold the following principal-level registrations, or who have held such registrations within the two years immediately prior to registering as an Operations Professional, would be qualified to register without passing the Qualification Examination: Series 4, 9/10, 14, 16, 23, 24, 26, 27, 28, 51, and 53. Persons holding representative-level registration in Series 6, 7, 17, and Series 37 or 38 would also be qualified without passing the Examination.