Series 65 Revamped to Test Economics, Investment Vehicles, ethics
WASHINGTON (December 27, 1999) — Starting January 1, new investment advisers will have to take a “competency exam” to show that they know what they’re talking about.
New advisers will have to take a 130-question state exam that tests their knowledge of economics, investment vehicles, investment strategies and ethics. The new exam replaces the 75-question Series 65 exam, which focused mainly on securities law.
Forty-two states and the District of Columbia—all U.S. jurisdictions that currently register or qualify investment adviser representatives¹ —are expected to adopt the new competency exam; the majority are expected to adopt the liberal grandfathering and waiver provisions in a model rule proposed by the North American Securities Administrators Association (NASAA).
“The number one goal of the exam is to achieve a higher level of investor protection,” said Donald Reis, Nevada’s Assistant Secretary of State, who chaired the committee that developed the exam. Reis noted that investment advisers are one of the fastest growing segments of the financial services industry. There are an estimated 125,000 investment adviser representatives in the United States. By contrast, there are more than 500,000 stock brokers.
“We test barbers and hair dressers to make sure they know how to cut and color hair. We should require financial advisers to prove that they know the difference between stocks and bonds–the investing public deserves no less,” said Reis.
The new, more comprehensive Series 65 investment adviser exam was developed by NASAA with input from more than 60 financial industry experts and in consultation with the Princeton, N.J.-based Chauncey Group, a leader in test development. The new exam will be administered by the regulatory arm of the National Association of Securities Dealers (NASD Regulation) at testing centers nationwide. Applicants will have 180 minutes to complete the exam, which will cost $110.
NASAA has proposed–and most states are expected to adopt–provisions that would exempt from the test requirement practicing investment advisers with professional certifications such as Certified Financial Planner (CFP) and Chartered Financial Analyst (CFA).
For more information, including a test outline and sample questions, prospective financial advisers can call their state securities regulator or visit the NASAA web site at http://www.nasaa.org/.
¹ Jurisdictions that do not currently register investment adviser representatives: Georgia, Louisiana, Michigan, Minnesota, New Jersey, New York, Tennessee, Wyoming and Puerto Rico.