For broker-dealers, a Series 7 license allows them to sell corporate stocks and bonds and a range of other securities, such as municipal bonds and mutual funds. But if they intend on pursuing investment banking activities, as well, they need another license: the Series 79.
To earn a Series 79 license, one must have passed two exams administered by the Financial Industry Regulatory Authority (FINRA). The Securities Industry Essentials (SIE) exam, which tests basic knowledge of securities industry information, and the Investment Banking Representative Exam, better known as the “Series 79 Exam,” which tests knowledge of investment banking functions, including mergers and acquisitions buyouts, and financial restructuring.
The Series 79 exam, according to FINRA, measures the degree to which each candidate possesses the knowledge needed to perform the critical functions of an investment banking representative, including advising on or facilitating debt or equity securities offerings through a private placement or a public offering and mergers and acquisitions.
HOW THE EXAM WORKS
Offered via computer, the Series 79 exam consists of 75 multiple-choice questions presented over two hours and 30 minutes. The test-taker must earn a 73 percent to pass. Approximately one-quarter of the questions are about M&A, tender offers, and financial restructuring; another quarter of the test is focused on types of offerings, underwriting, and registration of securities; and roughly half of the test consists of questions related to collecting, analyzing, and evaluating data.
A prospective test-taker must be sponsored by a FINRA member firm or self-regulatory organization (SRO) (such as the New York Stock Exchange). A sponsor must complete and file on the individual’s behalf a Uniform Application for Securities Industry Registration or Transfer (U4) through the Central Registration Depository (CRD).
Most sponsoring employers have training programs to help prepare test candidates, and exam preparation services are available for purchase as well. Eighty-seven percent of candidates passed the exam, according to FINRA data from 2019. By most public estimates, preparation usually takes between 60 to 100 hours, which includes, for most test-takers, a mix of individual study, practice questions and classroom instruction
The SIE exam, which is required before Series 79 or Series 7 licensing can occur, is also a computer-administered multiple-choice exam. The SIE exam does not require a prospective test-taker to be sponsored by a FINRA member firm or SRO. Like the Series 79 exam, it includes 75 questions and is one hour and 45 minutes in duration. The passing score is 70 percent. Topics covered include knowledge of capital markets, understanding products and their risks, understanding trading, customer accounts and prohibited activities, and a regulatory overview.
WHAT A LICENSE PERMITS
Upon passing the SIE and the Series 79 exam, the candidate is eligible for the Series 79 license (also known as the Investment Banking Representative registration). This permits the individual to advise on and facilitate:
- Debt and equity offerings (private placement or public offering)
- Mergers and acquisitions
- Tender offers
- Financial restructurings
- Asset sales
- Divestitures or other corporate reorganizations
- Business combination transactions
Once issued by FINRA, the Series 79 license remains in effect as long as the individual works for a FINRA member or SRO and completes required continuing education.
Expiration occurs if the employee exits a firm and does not find employment with a FINRA member or SRO within two years of their departure. Those who exited their previous eligible position more than two but less than four years ago, must retake the Series 79 exam, but not the SIE. After four years, an individual must take both exams again.
Our law firm has long advised the independent broker-dealer community. Firms with questions about FINRA exam requirements should contact us for a consultation.