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FINRA’s New Exam Lets CPAs, Tax Experts Take a Step Into the Securities Industry

Jan 10th 2018
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For accountants or tax experts seeking to broaden their knowledge or to start establishing a foundation in the securities industry in a move that might help their clients, the Financial Industry Regulatory Authority (FINRA) is offering a new introductory-level exam in October.

The Securities Industry Essentials (SIE or Essentials) Exam, which will be available from Oct. 1, is a new exam for prospective securities industry professionals.  The test, according to FINRA, assesses a candidate’s knowledge of basic securities industry information including basic concepts, regulatory agencies and their functions, and prohibited practices. 

But what sets this apart from other FINRA exams is that an applicant need not be required to be associated with a firm.

Still, FINRA states that passing the Essentials exam doesn’t entitle the participant for registration with FINRA or to engage in securities business. To become registered to engage in securities business, an individual must pass the Essentials exam and a qualification exam appropriate for the type of business the individual will engage in, according to FINRA. And that person must be associated with a member firm to take a qualification exam, among other requirements.

For candidates who are associated with firms and are planning to be certified, FINRA recently released areas of focus on its 2018 exam. These priorities include focusing on perennial target areas of fraud, elder financial abuse, cybersecurity and sales practices. It also features six new rules.

Here’s a snapshot of what they include and their applicable effective dates:

  • Financial Exploitation of Specified Adults: FINRA Rule 2165 takes effect Feb. 5. It allows members to temporarily hold disbursements of funds or securities from the accounts of certain customers believed to be financially exploited.
  • Customer Account Information: Effective Feb. 5, amendments to FINRA Rule 4512 will require members to make reasonable efforts to obtain the name of and contact information for a trusted person for a non-institutional customer’s account.
  • The Financial Crimes Enforcement Network’s (FinCEN) Customer Due Diligence Rule (CDD Rule): Firms must comply with the CDD Rule by May 11. FinCEN issued the rule to strengthen customer due diligence for covered financial institutions, including broker-dealers. FinCEN identifies four aspects of the rule: customer identification and verification; beneficial ownership identification and verification; understanding the nature and purpose of customer relationships; and continued surveillance for reporting suspicious transactions and, on a risk basis, maintaining and updating customer information.
  • Customer Confirmations: Effective May 14, the amended FINRA Rule 2232 requires members to disclose the amount of mark-ups or mark-downs it applies to trades with retail customers in corporate or agency debt securities if the member also executes offsetting principal trades in the same security on the same trading day. The amended rule also requires members to disclose two additional items on all retail customer confirmations for corporate and agency debt security trades: a reference, and a hyperlink if the confirmation is electronic, to a web page hosted by FINRA that contains publicly available trading data for the specific security that was traded; and the exact time (to the second) of the transaction.
  • Margin Requirements for Covered Agency Transactions (Amendments to FINRA Rule 4210): Effective June 25, the amendments to FINRA Rule 4210 include: To Be Announced (TBA) transactions, including adjustable rate mortgage transactions; specified pool transactions; and transactions in collateralized mortgage obligations (CMOs) that conform with a program of an agency or government-sponsored enterprise , with forward settlement dates. Members are reminded that the risk limit determination requirements under the amendments to Rule 4210 took effect Dec. 15, 2016.

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