How Does the Series 63 Exam Test the Principles of State Securities Regulation?
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Overview
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The Series 63 Exam is the common name for the Uniform Securities Agent State Law Examination designed to qualify investment professionals to become securities agents. The exam tests candidates' knowledge of state securities regulations as outlined in the Uniform Securities Act. The Series 63 exam is called a criterion-based minimum competency test. This means that the test establishes minimum passing criteria. Candidates who pass the exam have met this minimum criteria, and are established as minimally competent investment professionals to act as securities agents, investment advisers or broker dealers, who sell investment products to members of the public. The exam was developed by the North American Securities Administrators Association (NASAA) and is administered by the Financial Industry Regulatory Authority (FINRA).
Principles of State Securities Regulation (SSR)
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Each state has laws, rules and regulations that govern the offering and sale of securities. These laws are for the most part fashioned after the Uniform Securities Act. The Act outlines what are considered fraudulent and prohibited practices, as well as rules governing registration of investment advisers, investment-adviser representatives, broker dealers and agents. It also contains principles governing registration and notice-filing procedures for securities. The Series 63 exam tests a candidate's understanding of these principles, of state law governing securities, and of what constitutes unethical and dishonest business practices.
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SSR on the Series 63 Exam
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The Series 63 exam contains 65 questions, five of which are pretest questions being tested for future exams and do not count toward the final score. A candidate must score 70 percent to pass. The exam is divided into four sections. Section I consists of 18 questions (30 percent of the final score) and covers the principles governing registration of persons as broker dealers, agents and other investment professionals, as well as record-keeping and financial-reporting requirements. Section II tests candidates' knowledge of principles governing securities transactions. It contains 15 questions and counts toward 25 percent of the final score. Section III contains 21 questions (35 percent of the final score) and focuses on business practices, including what constitutes dishonest business practices. Section IV tests knowledge of administrative procedures such as investigations and disciplinary action, as well as civil and criminal penalties and liabilities. It contains six questions and counts for 10 percent of the final score.
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