There's good news and bad news for planners seeking state registration as advisors with the North American Securities Administrators Association.
The good: The NASAA is reducing the number of correct scores required to pass the Series 65.
The bad: Test takers will have to start boning up on somewhat esoteric topics like initial public offerings and special purpose acquisition companies.
NASAA, which represents state and provincial regulators in the U.S., Canada and Mexico, plans to introduce changes to its Series 63, 65 and 66 exams on June 12.
The Series 63 qualifies test takers for registration at the state level as brokers who can trade in things like stocks, bonds and other securities. The Series 65 allows them to become state-registered Investment Adviser Representatives who can recommend investment strategies and manage client portfolios. And the Series 66 covers similar ground and allows takers to be registered as both securities agents and IARs.
IARs have permission from state regulators to recommend investment plans and manage investment portfolios in return for a fee. Planners who aren't IARs are legally permitted to do things like help clients with budgets, retirement savings and most insurance purchases.
"But the moment we start talking about securities, even if it's somebody you are dealing with that has a portfolio that includes securities and you're recommending they liquidate those securities, then you're over the line," said Chuck Lowenstein, a senior content editor at the test preparation company Kaplan.
Lowenstein said NASAA's biggest changes will be to
The Series 65 consists of 140 questions, 10 of which are used merely for developing future versions of the test. Of the 130 "scored" questions, exam sitters must now get 94 — or 72.3% of the total — correct for a passing grade. Come June 12, that requirement will drop to 92 of the 130, or 70.8% of the total.
But that doesn't mean the test is getting easier. NASAA has added new sections on somewhat complicated subjects like initial public offerings — events marking the first sale of stock by companies that are going public — and secondary offerings, or the resale of shares first put on the market in an IPO.
"Part of the current exam talks about the rules on registering securities," said Lowenstein, who records Series 65 video courses for Kaplan. "But you can't really talk about the rules of registering securities without defining what an IPO is. And some of that stuff is a little more complicated."
Lowenstein said it's also interesting that NASAA wants to make sure advisors dealing in securities are familiar with special purpose acquisition companies, or SPACs for short. These "blank check" companies raise capital by selling shares in an IPO for the express purpose of buying private firms.
They've existed for decades but have become a notably popular investment vehicle only in the last few years. In 2020 and 2021, investors
In May 2022, for instance, the
Lowenstein said these are all developments advisors should at least have a passing familiarity with. That's especially true if they're going to be in the business of recommending investing strategies and managing stock and bond portfolios. He said he also expects the new Series 65 exam to have questions pertaining to cryptocurrency and other types of digital assets.
"Not that that's really a prudent investment for an Investment Adviser Representative to be recommending," he added.
A spokesman for NASAA declined to provide specific questions from the new tests. Natasha Hurt, NASAA senior manager of regulatory services, confirmed that NASAA officials believe the new version of the Series 65 will be a little harder than the current one. The test revisions were made with the help of Prometric, a test development company.
"What it represents is that statistically speaking, the new Series 65 test specifications are expected to be viewed as slightly more difficult than the current version," Hurt said in an email. "While the current exam expects a minimally qualified candidate to receive a 72% or greater, when the new test specifications are implemented, a minimally qualified candidate should expect to receive a 70% or greater."
NASAA does not make the pass-fail rates for the Series 65 or its other exams public. A spokesman for Kaplan also said his company doesn't publish its pass rates, in part because it can collect test results only from exam takers who choose to report them.
People taking the Series 65 are given 180 minutes to complete it. The test is usually administered by FINRA at designated
NASAA is planning smaller modifications for its Series 63 and 66 tests. The Series 66, for instance, will go from having five questions on economics and business information to eight. The number of questions it has on investment vehicles will, meanwhile, fall from 20 to 17. Lowenstein characterized the changes as fairly insignificant.
The Series 63 largely tests takers' knowledge of the Uniform Securities Act, model legislation that many states have adopted to combat securities fraud and other unethical behavior. Exam sitters have 75 minutes to answer its 60 scored multiple-choice questions. Of those, 43 — or about 72% of the total — must be answered correctly. Passing the test often allows an advisor to act as a securities agent who's licensed to trade in stocks, bonds and securities in a given state.
The Series 66 exam combines aspects of both the Series 63 and 65 tests. Passing it qualifies a person as both a securities agent and an IAR. Lowenstein said, though, that the Series 66 does not allow advisors to set up their own firms, only work as representatives of larger companies. The Series 66 exam consists of 100 scored questions, 73 of which must be answered correctly to pass. Test takers have 150 minutes to complete it.
The exams all have different prerequisites, as well. Anyone taking the Series 66 must first complete FINRA's Series 7 exam, which enables a planner to be registered as a broker at the federal level. By contrast, there are no prerequisites for the Series 63 and 65, but dealing in securities either as a broker or an advisor usually requires passing FINRA's Series 7 or Series 6 test, which deals with sales of mutual funds, insurance and other products.
