Investment advisers will soon face new “competency” exam

WASHINGTON (June 7, 1999) – If you’re thinking of hanging out a shingle to offer investment advice, soon you’ll have to take a new exam to show you know your stuff.

Starting January 1 state securities regulators will require new investment advisers to take a 130-question “competency exam” that will cover subjects such as economics, investment vehicles, investment strategies and ethics. The test will replace an existing exam, the 75-question Series 65, that focuses mainly on securities law and ethics.

Three years in the works, the new, more comprehensive investment adviser exam was developed by the North American Securities Administrators Association, a group that represents state securities regulators. The new Series 65 exam also reflects the input of more than 60 financial industry experts. The exam will be administered by the regulatory arm of the National Association of Securities Dealers at testing centers nationwide. Applicants will have 180 minutes to complete the exam. It will cost $110.

“With more Americans relying on investment advisers we need to make very sure they have the basic knowledge to offer advice,” said Donald Reis, Nevada’s Assistant Secretary of State, who chaired the committee that developed the exam. “We test barbers, beauticians and stockbrokers before they get licensed; investment advisers should be no different.”

Commenting on the exam, Robert Goss, president of the Denver-based Certified Financial Planner Board of Standards, said: “Competency and ethics have long been top concerns of consumers when dealing with financial planners and advisers. We’re pleased that state securities regulators are taking this step to help investors.”

Laura Polacheck, a senior analyst with AARP`s Division of Legislation and Public Policy, called the new competency exam “an excellent idea because it gives investors needed assurance that the person they’re dealing with – and relying upon for professional advice — has the minimum skills necessary to provide competent, suitable advice. Without testing, it`s very difficult, if not impossible, for investors to make this determination.”

In states where individuals are required to be licensed as both stock brokers and investment advisers they will have to take a new exam, the Series 66. The 100-question exam will cover investment analysis, recommendations and strategies, ethics and legal guidelines. The Series 66 is basically a combination of the current Series 63, a state licensing exam for stockbrokers, and the new Series 65 investment adviser competency exam.

The Series 66 exam will only be given to those who have passed the NASD’s Series 7 exam, which covers investment vehicles and economics. To prevent brokers who passed the Series 7 from having to be tested on the same exam content in the new Series 65, a NASAA-assembled committee of industry experts compared the two exams and deleted duplicative questions.

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1999 Headlines, Newsroom