FINRA Revises Testing Regs
So long Series 7; the Financial Industry Regulatory Authority has issued new testing regulations for deal pros.
July 30, 2009
The Financial Industry Regulatory Authority will rearrange testing regulations for investment bankers that could impact thousands of professionals.
A Series 79 test must be taken by individuals facilitating debt or securities offerings via private placements or public offerings and advisors on M&A, tender offers, restructurings or other reorganizations. The rule, which has professionals taking the new test in lieu of the Series 7 examination, does not cover individuals whose banking work is limited to public finance or direct participation programs.
“When you’re talking about raising private capital, you’re talking about something that needs to be highly regulated,” said Mike Ertel, a professional with Florida-based Legacy M&A Advisors, who spoke at the Alliance of Merger & Acquisition Advisors summer conference in Chicago Wednesday. “We have gotten a lot of favorable responses from regulators.”
The new testing regulations will take effect Nov. 2. There will be a six-month time frame in which already-accredited individuals can grandfather themselves into the process without having to take the new test; after that, they will have to begin the process anew. This means Series 7 license holders have until May 3, 2010, to submit paperwork amending their status.
It remains possible that investment bankers will continue to see further intrusion from legislators and regulators, acknowledged Tanya Solov, Illinois Securities Director and Chair of the Broker-Dealer Section of the North American Securities Administrators Association.
“This is something that will continue to receive attention [from the Securities and Exchange Commission],” she said in her speech to AMAA-Chicago attendees, adding, later, “there are still some issues that are a little bit vague.”
For bankers who switch firms, there will be a two-year grace period in which they will be allowed to operate under the terms of their former registration, but FINRA requires notification within that time frame of the job switch or else the test will have to be retaken.
There is a three-test limit, and the new five-hour test will consist of questions covering data evaluation, underwriting and offering types, M&A, tender offers and restructuring as well as regulations.
Shane Hansen, a partner with Warner Norcross & Judd, a Michigan-based law firm, said the FINRA testing rule switch will more closely align bankers’ competencies and areas of practice with appropriate testing measures.
The test will be administered electronically at approved testing centers (incoming test-takers should note that not even a calculator can be brought in; approved materials will be provided) and scores will be available almost immediately.
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