Series 63 Test

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Series 63 Test

History

The North American Securities Administrators Association (NASAA) is an organization of securities regulators that began in 1919 with a goal of protecting investors and drafting model legislation to regulate the activities of securities brokers and dealers across the United States, Canada, Mexico, and US Territories.[1] The Series 63 was first administered in 1979.[2]It was modeled after the Uniform Securities Act of 1956 as amended by NASAA, plus additional NASAA policy statements and model rules.[3] Rules regarding waiting periods to retake failed exams were instituted in 2000 to be more consistent with exams sponsored by the National Association of Securities Dealers (NASD).[4]

Function of the Test

Series 63 Study Guide

The Series 63 exam tests a securities agent’s knowledge of the Uniform Securities Act model legislation which forms the basis for state securities regulations, as well as model rules and policies adopted by the NASAA. By passing the exam, candidates demonstrate an understanding of the principles of state securities regulations and ethical standards that apply to securities trading.[5] Most states require individuals to pass either the Series 63 or Series 7 and 66 examinations in order to register as a securities agent and legally sell securities within their jurisdictions.[6] Passing the exam does not automatically result in licensing, however, and individuals must meet all other requirements of their individual state’s regulations. Typically, individuals are given a window of 2 years in which to become licensed after passing the exam.[7]

Test Administration

Series 63 Flashcards

The Series 63 exam is administered by the Financial Industry Regulatory Authority (FINRA). Electronic applications are accepted from FINRA member firms on behalf of their employees via a Form U4 available on the FINRA Web site. Individuals who are not currently associated with a member firm may apply directly to take the exam via Form U10, also available on FINRA’s Web site. The cost for individuals to take the exam is $115.[8] Exams are administered by FINRA and offered through Prometric testing centers located across the United States. After receiving an authorization to test, candidates have 120 days in which to schedule their exam with the testing center. Failure to appear for a scheduled exam without at least 10 business days’ notice will incur a cancellation/reschedule fee of $57.50. The entire examination fee will be charged for those who fail to give notice within 3 business days of their scheduled time, or who arrive so late as to forfeit their time slot.[9] Special accommodations for documented disabilities may be requested by completing a “Special Accommodations Eligibility Questionnaire” and “Special Accommodations Verification Request Form” and sending them to FINRA with supporting documentation.[10] Candidates identified as “Limited English Proficiency” (LEP) and their employers may request 30 minutes of additional time in which to take the exam.[11] Candidates receive a printed score report on completion of testing. Sponsoring organizations receive pass/fail notification and may, if requested, obtain their candidates’ scores from FINRA.[12] A candidate who does not pass the first examination attempt may schedule an appointment to retake the exam after a 30-day waiting period. If the second attempt is not successful, a third attempt may be scheduled after an additional 30-day period. Subsequent attempts may be scheduled after a 180-day waiting period. There are no limits on the amount of attempts a candidate may make in order to achieve a passing score.[13]

Test Format

Sections of the Series 63 Test
Series 63 Test Subject Areas # Questions  % of Exam
State Securities Acts and related rules and regulations 36 60%
Ethical Practices and fiduciary obligations 24 40%
Total 60 100%

Test Structure

The Series 63 Exam is a multiple choice exam made up of sixty-five questions. Out of the sixty-five, five are unscored, pretest questions that carry no weight, although they will be mixed in to the test and unidentifiable. All of the questions will have to do with two major topics: State Securities Acts and related rules and regulations, and Ethical practices and fiduciary obligations. To pass, one must answer at least forty-three of the scored sixty questions correctly. [14]

Test Environment

Testing for the Series 63 Exam takes place at Prometric Testing Centers and Pearson VUE Testing Centers. Both places require two forms of valid ID for admission, one of which must be a government-issued, photo identification. Electronics such as cell phones, tablets, and cameras are not allowed. There will typically be lockers provided to store all personal items for the duration of the exam. Candidates will find out if they pass or fail upon completion. [15]

Test Content

  • Sample Series 63 questions
  1. Which title defines a person associated with an investment adviser who manages accounts or portfolios?
    A. Account representative
    B. Investment adviser representative
    C. Federally covered investment adviser
    D. Administrative assistant
  2. If a state Administrator plans to revoke the registration of a security, what must be provided to the issuer of that security?
    A. A cease-and-desist order
    B. A temporary suspension pending the outcome of a hearing
    C. A written findings of fact and conclusions of law
    D. A notice of a hearing
  3. What is the definition of a material fact?
    A. Information provided by the Board of Directors of an issuer of a security
    B. Information found in the financial statements of an investment
    C. Information found in the prospectus for a security
    D. Information that an investor relies upon when deciding whether or not to invest
  4. A broker-dealer participating in a public offering must make available what percentage of its allotment?
    A. 75%
    B. 80%
    C. 90%
    D. 100%
  5. How often must an investment adviser obtain client authorization for securities transactions?
    A. Before the first transaction if the client has provided written authorization
    B. Before receiving instructions from a third party
    C. Before every transaction
    D. When creating an annual financial plan
  6. Which is critical when proving fraud in a securities transaction?
    A. Misleading information must have been provided
    B. A recommendation based on false information must have been made
    C. A person withheld information from a client
    D. A person must deliberately act in a manner designed to mislead

Scoring

The exam consists of 65 multiple-choice questions, 60 of which are included in calculating the overall score. A candidate must answer 43 of the 60 (just over 70%) of the scored questions correctly to pass the exam. Only correct answers are counted toward the final score, so there is no guessing penalty. Scores are made available immediately upon completion of the exam.[16]

Recent/Future Developments

The Series 63 will at be updated to reflect changes in the 2002 amendment to the Uniform Securities Act when the NASAA determines that enough jurisdictions have adopted the newer version of the Act. As of 2014, only 17 states plus the U.S. Virgin Islands and Puerto Rico had adopted the new rules. Test preparation vendors will receive ample notice of any content changes prior to implementation of a revised exam.[17]

Answers to Sample Questions

1;B 2;C 3;D 4;D 5;C 6;D

References

  1. ^ NASAA History November 17, 2014
  2. ^ Qualifications Frequently Asked Questions (FAQ) – Examinations November 17, 2014
  3. ^ North American Securities Administrators Association Exam FAQs November 17, 2014
  4. ^ NASAA Implements Waiting Period for Those Who Fail Exams November 17, 2014
  5. ^ North American Securities Administrators Association Series 63 Overview November 17, 2014
  6. ^ FINRA Industry Professionals CRD System AG Qualification Requirements November 17, 2014
  7. ^ North American Securities Administrator Association Exam FAQs November 17, 2014
  8. ^ North American Securities Administrators Association Series 63 Overview November 17, 2014
  9. ^ FINRA Cancellation and Reschedule Policy November 17, 2014
  10. ^ FINRA Special Accommodations November 17, 2014
  11. ^ Candidates With Limited English Proficiency (LEP) November 17, 2014
  12. ^ NASAA’s Policy for Employees of Eligible Organizations Who Wish to Take NASAA-Owned Examinations November 17, 2014
  13. ^ North American Securities Administrators Association Series 63 Overview November 17, 2014
  14. ^ Exam Information 17 October 2014
  15. ^ Series 63 Overview 17 October 2014
  16. ^ North American Securities Administrators Association Series 63 Overview November 17, 2014
  17. ^ North American Securities Administrators Association Exam FAQs November 17, 2014