The U.S. Financial Industry Regulatory Authority Inc. (FINRA) is looking to ease a barrier to entering the U.S. securities industry by reducing the time that aspiring reps that fail their industry entrance exams must wait before they can retake those exams.
In a filing with the U.S. Securities and Exchange Commission (SEC), the U.S. industry self-regulatory organization is proposing revisions to the rule that governs waiting periods for retaking failed exams.
Under the current rule, for the first two failed attempts, the waiting period is 30 days. After a third failed test, you have to wait an additional 180 days.
Those waiting periods were adopted for several reasons, the SRO said — to protect the integrity of the exam process, to encourage aspiring reps to learn the material, rather than just quickly retaking the test having recently seen the exam questions, and to give it more time to investigate potential breaches of its exam conduct rules.
However, since the current rule was implemented in 1989, the industry qualification program has changed significantly too, it noted — and the industry has pushed for shorter waiting periods, arguing that the existing rules represent a burden on aspiring reps.
As a result, the SRO is now proposing to cut the waiting period for the first two attempts from 30 days to 15 days, and to drop the 180-day pause for a third failed attempt to just 60 days.
In its filings with the SEC, FINRA said that it believes that, given the changes to the exam program in recent years — which have reduced concerns about gaming or cheating the exam — shortening the waiting periods, “would lessen the burden on individuals who are trying to register to begin their employment in the securities industry while also continuing to protect investors by maintaining appropriate program integrity.”
Among other things, the SRO noted that its qualification exams now draw from voluminous question banks that contain thousands of questions, meaning that each exam only uses a small subset of those questions.
“This approach reduces both the likelihood that repeat test takers will depend on memorized questions from prior attempts and the risk of content being disseminated to others,” it said.
Additionally, FINRA says that it’s now using advanced technology to identify suspected misconduct and compromised exam content, it said.
“[T]hese enhanced detection capabilities help to ensure that the shortened waiting periods would not compromise FINRA’s ability to conduct timely investigations into possible cheating or other violations,” it said.
By shortening the waiting period, FINRA said that reps seeking to join the industry will benefit from starting their careers more quickly and industry firms will benefit from more quickly hiring qualified candidates and filtering out those that can’t pass the exam.