DOB: Securities Industry Personnel Testing Requirements

Common Questions and Answers
on Testing Requirements for
Securities Industry Personnel

{Training a New Employee}

[ BD Firms | BD Agents | IA Firms and Agents ]

Effective August 22, 1994, the Regulations under the Connecticut Uniform Securities Act were amended. The changes included modifications to the examination requirements for securities personnel. Here are answers to some commonly asked questions.



BROKER-DEALER FIRMS

Q: Are there any special testing requirements for firm personnel who are not applying for agent registration in Connecticut?

A: Yes. Every applicant for broker-dealer registration must show that all officers, partners or sole proprietors who act as managers have passed an examination as principal given by the Securities and Exchange Commission (the "SEC") or a securities self-regulatory organization ("SRO") registered under the Securities Exchange Act of 1934.

Q: What is a manager?

A: Under Reg. Section 36b-31-15e (formerly § 36-500-484e), a manager is either 1) any person who directly or indirectly supervises securities sales personnel or 2) any person responsible for the day-to-day operation and supervision of a broker-dealer office in Connecticut.

Q: What if a corporate officer, say the secretary, does not exercise any managerial duties?

A: The secretary would not have to take the principal's examination. However, be sure to provide a written explanation, signed by a partner, officer or authorized individual of similar rank, when the firm applies for registration.

Q: Must anyone else take the principal's exam?

A: Yes. Reg. § 36b-31-15e(b) requires that, for initial applicants for broker-dealer registration, all managers must take the exam as well.

Q: Are there any special rules once the firm becomes registered as a broker-dealer?

A: Yes. Under Reg. § 36b-31-15e(c), every registered broker-dealer must show that all new officers, partners or sole proprietors who act as managers have passed the principal's examination. This is done by amending the firm's filing.

Q: What if a registered firm hires a new manager with supervisory responsibility over Connecticut sales activity? Must he or she take the principal's exam?

A: Yes.

Q: I represent a general partnership that is applying for broker-dealer registration. There are two partners and one manager. All three will actively supervise the firm's operations. Before the partnership was formed, all three worked for another Connecticut registered broker-dealer for 30 years. Must they take the principal's exam?

A: No. Under Reg. § 36b-31-15e(g), if the individual became associated with a registered broker-dealer before October 1, 1965 and has been continuously associated with a registered broker-dealer since that time, he or she does not have to pass the principal's exam.

Q: Now that the partnership is registered, it has decided to bring in another partner to manage its options operations. That partner was associated with an unregistered firm from 1989 to 1991. Must he pass the principal's exam?

A: Yes.


 

BROKER-DEALER AGENTS

Q: Are there any special testing requirements for broker-dealer agents?

A: Yes. There are two examination requirements for broker-dealer agents. Under Reg.§ 36b-31-15e(d)(1), every applicant for broker-dealer agent registration must show that he or she has passed an exam given by the SEC or a securities SRO registered under the Securities Exchange Act of 1934. Under Reg. § 36b-31-15e(d)(2), effective October 1, 1994, each applicant for agent registration must pass the Uniform State Agents Securities Law Examination (Series 63).

Q: What exam does Reg. § 36b-31-15e(d)(1) cover?

A: Reg. § 36b-31-15e(d)(1) does not prescribe a specific exam. However, Reg. § 36b-31-15b(a)(7) makes it a dishonest or unethical practice for an agent to effect transactions in securities products concerning which the agent has not passed an exam given by an SRO registered under the Securities Exchange Act of 1934 which would quality the agent to offer, sell or buy such products.

Q: Are there any exceptions to the Reg. § 36b-31-15e(d)(1) exam requirement?

A: Yes. Under Reg. § 36b-31-15e(g), an agent would not have to take a product specific exam if 1) he or she became associated with a registered broker-dealer prior to July 1, 1963; 2) was continuously associated with a registered broker-dealer since that date; and 3) has not been the subject of any disciplinary action or any finding of securities-related misconduct.

Q: Are any broker-dealer agents "grandfathered" from having to take the Series 63 exam?

A: Under Reg. § 36b-31-15e(h), you must "look back" to October 1, 1994. If, on that date, you were associated with a registered broker-dealer, and if you were not the subject of any disciplinary action, you need not take the exam.

Q: What types of disciplinary actions do the Regulations cover?

A: Like the regulation covering investment adviser agents, Reg.§ 36b-31-15e(h) divides disciplinary events into three types: 1) disciplinary actions including suspension or expulsion from membership in an SRO, suspension or revocation, fine or censure; 2) those involving a finding that you have violated any law concerning the supervision of the securities industry or any rule or regulation of a federally registered SRO; and 3) those involving a finding that you were a cause of any disciplinary action by the SEC or any securities governmental agency or any SRO.

Q: What are specific examples of disciplinary actions?

A: As a guideline, consider those actions that would support administrative action under C.G.S. § 36b-15 (denial, suspension or revocation of registration). Although each case must be decided on its own merits, personal bankruptcy, arbitration proceedings and liens would probably not, in and of themselves, constitute disciplinary events for purposes of the regulation.

Q: As of October 1, 1994, I was not associated with a registered broker-dealer, yet I have no disciplinary history. Must I take the exam?

A: Yes.

Q: Are any broker-dealer agents otherwise exempted from having to take the Series 63 exam?

A: Yes. If you have passed the Series 66 examination as well as FINRA’s Series 7 examination, you do not have to take the Series 63 exam.


 

INVESTMENT ADVISER FIRMS AND INVESTMENT ADVISER AGENTS

Q: Are there any special testing requirements for investment advisory firms as such?

A: No. However, effective October 1, 1994, applicants for investment adviser agent registration must pass the Uniform Investment Adviser Law Exam (Series 65) or the Series 66 examination.

Q: What is an investment adviser agent?

A: Under C.G.S. § 36b-3(11), an investment adviser agent is one of the following:

  • An individual (including an officer, partner or director of the investment adviser) who is employed, appointed, authorized or associated with an investment adviser to solicit business for the investment adviser. The individual must directly or indirectly receive compensation or other remuneration for the solicitation activity to be considered an "investment adviser agent."
  • A partner, officer, or director of the investment adviser, or an individual employed, appointed, authorized or associated with the investment adviser, who makes any recommendation or otherwise renders securities advice to clients and who directly or indirectly receives compensation or other remuneration for the advisory services.

Q: Our firm is registered as an investment adviser with the Securities and Exchange Commission and therefore exempt from Connecticut registration under C.G.S. § 36b-6(e)(1), although we do make an annual notice filing with Connecticut. Would those individuals who represent our firm be considered "investment adviser agents" under Connecticut law?

A: If the representatives are "supervised persons" as defined in Section 202(a)(25) of the federal Investment Advisers Act of 1940, they would not be considered "investment adviser agents" under Connecticut law. Section 202(a)(25) of the Investment Advisers Act of 1940 defines "supervised person" to mean "any partner, officer, director (or other person occupying a similar status or performing similar functions), or employee of an investment adviser, or other person who provides investment advice on behalf of the investment adviser and is subject to the supervision and control of the investment adviser." However, if the "supervised person" is an "investment adviser representative", as defined in Securities and Exchange Commission Rule 203A-3, 17 CFR 275.203A-3, then he or she would be deemed an "investment adviser agent" in Connecticut.

Q: I am a sole proprietor investment adviser. Must I take the Series 65 or Series 66 exam?

A: No, unless you transact business as an investment adviser agent of another investment adviser or the department determines that the examination is warranted in light of your background and experience.

Q: I represent a partnership that is a state-registered investment adviser. Must all partners take the Series 65 or Series 66 exam?

A: If they directly or indirectly are compensated for solicitation activity or for giving securities-related investment advice, they must register as investment adviser agents, and, unless eligible for an exemption, take the Series 65 or Series 66 exam.

Q: After January 1, 2000, I applied for investment adviser agent registration in Connecticut. I had not been registered as an investment adviser agent in the state before. Are there any new requirements of which I should be aware?

A: Yes. Effective January 1, 2000, the Modified Series 65 examination, which is designed to focus on investment advisory competency, will fulfill the examination requirement in Section 36b-31-15e(e) of the Regulations. Passing the Series 66 examination will also suffice. (See next question.)

Q: After January 1, 2000, I applied for investment adviser agent registration in Connecticut and passed the Series 66 examination. Do I still have to pass the Modified Series 65 Competency Examination?

A: No. The Series 66 examination is an acceptable substitute.

Q: I am a sole proprietor financial planner. On January 1, 2000, I renewed my investment advisory registration in Connecticut. I am now almost ready to retire, and wish to work for someone else's investment advisory firm as an investment adviser agent. Must I take the Modified Series 65 Competency Examination?

A: No. By Order dated December 2, 1999, the Commissioner waived the Modified Series 65 Competency Examination for individuals who were registered as investment advisers on January 1, 2000.

Q: On January 1, 2000, I renewed my registration as agent of an investment advisory firm in Connecticut. Must I satisfy the new Modified Series 65 Competency Examination requirement?

A: No. By Order dated December 2, 1999, the Commissioner waived the Modified Series 65 Competency Examination requirement for individuals registered as investment adviser agents on January 1, 2000.

Q: I passed the old Series 65 examination several years ago. My business associate passed the Series 66 examination in 1997. Both of us have been continuously registered as investment adviser agents in another state for the immediately preceding two years. We now want to register as investment adviser agents in Connecticut. Must both of us pass the Modified Series 65 Competency Examination?

A: No. By Order dated December 2, 1999, the Commissioner "grandfathered" from the Modified Series 65 Competency Examination any individual who has passed the previous version of the Series 65 or the Series 66 examination and who has been continuously registered as an investment adviser agent or as an investment adviser in any other state for the immediately preceding two years.

Q: I have never been registered as an investment adviser agent in Connecticut but did become registered as an investment adviser agent in another state one year ago. For the past couple of years, I have earned two industry designations. Although I would not be "grandfathered" from having to pass the Modified Series 65 Competency Examination, what designations would qualify me for an examination waiver once I apply for investment adviser registration in Connecticut?

A: Several: 1) The Chartered Investment Counselor (CIC) designation conferred by the Investment Adviser Association (formerly known as the Investment Counsel Association of America or ICAA); 2) the Chartered Financial Analyst (CFA) designation conferred by the Association for Investment Management and Research; 3) the Certified Financial Planner (CFP) designation conferred by the Certified Financial Planner Board of Standards, Inc.; 4) the Personal Financial Specialist (PFS) designation conferred by the American Institute of Certified Public Accountants; and 5) the Chartered Financial Consultant (ChFC) and Chartered Life Underwriter (CLU) designations awarded by the American College, Bryn Mawr, Pennsylvania where the designation holder is subject to, and in compliance with, continuing education requirements prescribed by the American College and the Society of Financial Service Professionals.

Q: I am a certified public accountant who applied for Connecticut investment adviser agent registration after January 1, 2000. I had never applied for registration before. The CPA down the street told me that the Modified Series 65 Examination had been waived for him since he had earned the Personal Financial Specialist (PFS) designation conferred by the American Institute of Certified Public Accountants. I have not earned the designation but I am a CPA. Do I qualify for a waiver?

A: No.

Q: Although I am a CPA who has never applied for Connecticut investment adviser agent registration before, I have a doctorate in economic theory; have taught courses in market analysis at a major university; and have written an authoritative treatise on investment principles. Must I still take the Modified Series 65 Competency Examination? I do not hold the PFS designation.

A: Not necessarily. The Commissioner has discretion to waive the examination based upon a comprehensive evaluation of the applicant's prior employment, educational background, professional designations and disciplinary history.

Q: On June 1, 1994, I became registered as an investment adviser agent in Connecticut and remained registered until the end of 1994. I was "grandfathered" from having to pass the old Series 65 examination because I had been associated with a registered investment adviser on October 1, 1994. In January, 1995, I took a sabbatical from the investment advisory industry and did not earn any designations, pursue any academic courses or work in the industry. In February, 2000, I applied for investment adviser registration in Connecticut. Would I be "grandfathered" from having to pass the Modified Series 65 Competency Examination?

A: No. The "grandfather" provision in Section 36b-31-15e(i) of the Regulations only applies to the old Series 65 examination.