Series 79: Finra Creates a New Exam for Investment Bankers

A New Qualification Examination

The long anticipated Series 79 Exam has been approved by the SEC.  This newly created registration category resulted from member firms whose lines of business included investment banking. These firms wanted to simplify training and qualification requirements for those reps who worked solely in that field. This new registration category is technically known as the Limited Representative - Investment Banker Registration.

Working with the members, FINRA analyzed the jobs of entry-level bankers and their supervisors, and developed this new competency exam to provide a more targeted assessment of the job functions performed by associated persons who fall within the new category. The exam will be required in lieu of the current Series 7 Exam by those who act as investment bankers. Any person whose activities go beyond investment banking must separately qualify. For instance, an investment banker who occasionally effects trades in non-exempt securities for retail customers would have to be Series 7 licensed in addition to  Series 79 following the “opt-in” period (See below).

Following the opt-in period, an associated person will need to qualify as an investment banker by passing the Series 79 Exam if he or she is involved in advising on or facilitating:

• debt or equity securities offerings through a private placement or a public offering, including but not limited to origination, underwriting, marketing, structuring, syndication, and
• pricing of such securities and managing the allocation and stabilization activities of such offerings, or
• mergers and acquisitions, tender offers, financial restructurings, asset sales, divestitures or other corporate reorganizations or business combination transactions, including but not limited to rendering a fairness, solvency, or similar opinion.

Transition "Opt-In" Period
For six months, beginning on the effective date and ending May 3, 2010, reps as well as new investment banking applicants will be able to register as an Investment Banking Representative if they have passed the Series 7 exam by simply opting in to the Investment Banking Representative registration on an amended Form U-4. Individuals who choose to opt in will maintain their Series 7 registered rep status in addition to the new investment banking registration without taking an exam!

May 3, 2010 – The Cut Off Date
After May 3, 2010, anyone wishing to work in the investment banking business will have to pass the Series 79 Exam.

Who Does NOT Have to Take the Series 79 Exam?
This new registration category does not cover individuals whose investment banking work is limited to municipal finance or direct participation programs such as limited partnerships. In addition, if the rep’s work is limited to effecting private securities offerings where the offering does not exceed $5 million and is sold only to accredited investors. In that case the reps may continue to function by passing the long established Series 82 Exam.

New Investment Banking Representative Candidates
During the six-month transition period, FINRA will permit new Limited Representative - Investment Banking candidates a choice.  They may sit for either the Series 7 Exam or Series 79 Exam. Those who choose to take and pass the Series 7 Exam may then opt-in to the Investment Banking Representative registration. If they take the Series 79 they will be limited solely to
investment banking business.

"Effective November 2, 2009, amendments to NASD Rules 1022 and 1032 require individuals whose activities are limited to investment banking and principals who supervise such activities to pass the new Limited Representative - Investment Banking Qualification Examination (Series 79 Exam). Individuals who are registered as a General Securities Representative (Series 7) and engage in the member firm's investment banking business as described in NASD Rule 1032(i) may "opt-in" to the new registration category by May 3, 2010 (within six months of the effective date)."

Principal Qualifications
If an associated person wishes to take the Series 24 they must first pass one of several exams as an acceptable prerequisite exam.  The Series 79 Exam has been added to the list of exams that satisfy the prerequisite requirement. However, if Series 24-qualified AP’s scope of responsibility is to supervise solely investment banking activities as described, above they must pass (or opt-in) the Series 79 Exam—as well as pass the Series 24. They would be limited to acting as a general securities principal for covered investment banking activities. Those people who wish to supervise broader securities-related activities must take Series 7 in addition to the Series 24.
Principals also enjoy the same six month opt-in period. Those individuals who choose to opt-in will retain their Series 7 registration in addition to the Investment Banking Representative registration. After the end of the opt-in period, individuals who wish to function as a general securities principal overseeing investment banking at their firm will be required to pass the Series 79 Exam to function as a general securities principal supervising investment banking.

Exam Content
The Outline was developed based on a job analysis of new investment bankers. There are 175 multiple-choice questions on the Series 79 broken down in the following way.

Section	Description	Number of Questions
1	Collection, Analysis, and Evaluation of Data	75
2	Underwriting/New Financing Transactions, Types of Offerings, and Registration of Securities	43
3	Mergers and Acquisitions, Tender Offers, and Financial Restructuring Transactions	34
4	General Securities Industry Regulations	23
	Total	175

Candidates will be given five hours to complete the exam with no scheduled break. Like all FINRA exams, the proctor will provide scratch paper, an exhibits book, and a basic electronic calculator to candidates.

Passing Score
Caution: The passing score on the Series 79 Exam is a moving target. Multiple forms of the examination will be administered and a passing score will fluctuate moderately from exam to exam. It’s entirely possible that a candidate could score a 72% and fail, then on a subsequent attempt score a 71% and pass! The pass point for an exam will be indicated on the score report following the exam.  

Immediate “Opt-In” Solution - Series 7
Should you or your organization choose to opt-in and qualify your new reps by sitting for the Series 7, Kaplan Financial Education is ready now!  Order your Series 7 Study Solution today!