SEC Supports FINRA Decision to Waive Exam Requirements Only in Rare Circumstances
The SEC recently upheld a FINRA decision denying the request of a member firm to waive the Series 7 for one of its reps based on his experience in the securities industry, educational achievement and regulatory experience. The SEC said that FINRA properly based its decision on its “Qualification Examination Waiver Guidelines.” Although the Rep had passed the Series 7, his registration lapsed because more than 2 years had elapsed since leaving his prior broker-dealer firm. During the lapse period, the Rep went to law school, interned at an SEC regional office for 4 months, and passed Level I of the CFA exam. Upon becoming associated with the petitioning broker-dealer, the Rep passed the Series 24. Nevertheless, FINRA refused to grant a waiver from the Series 7 exam. The SEC supported the FINRA decision that the law degree lacked “substantial emphasis on finance and investments,” the internship only lasted 4 months and that the prior employment with a broker-dealer only lasted a few months. The SEC also supported FINRA’s determination that the Series 7 is not subsumed within the Series 24; instead, they serve different purposes and test different subject matters.
OUR TAKE: We often get asked whether a Rep can avoid taking the Series 7 again after a 2-year lapse. This case shows that FINRA rarely grants waivers from the examination requirements and how FINRA makes its determinations. Unless FINRA gives you some indication that it would waive the exam, it’s probably a lot less time and effort to take the exam than appeal FINRA’s decision to require it.