Registration and Continuing Education

You cannot sell a security, take an order, or supervise the people who do until FINRA registers you. This lesson covers who must register, what an unregistered person may still do, who the rules keep out, and the training you owe every year.

Registered and non-registered persons

An associated person is anyone who works for a member firm: a partner, officer, director, or employee. A registered person is an associated person who does securities business, has passed the required exams, and holds a registration FINRA approved.

Registration runs through the Central Registration Depository (CRD), the industry database FINRA operates. Your firm files a Form U4 (the industry's registration application) for you, you pass the exams, and FINRA approves the registration.

Two exams register you as a representative:

• The SIE, which anyone 18 or older may take, with or without a firm.
• A representative-level exam that matches the job. The Series 7 covers a general securities representative. The Series 6 covers mutual funds and variable contracts.

Passing the SIE alone does not register you. It is half of the requirement, and the result lasts four years.

Principals are the other category. A principal supervises the firm's securities business and passes a principal exam, such as the Series 24.

What each may do

Your registration category sets what you may do. A registered representative may prospect for customers, recommend securities, take orders, and earn commissions on the products that category covers.

A non-registered person may do clerical and ministerial work only:

• Answer the phone, take a message, and pass the call to a registered representative.
• Schedule appointments and enter data.
• Send a prospectus or sales material that the customer asked for.

A non-registered person may never take an order, recommend a security, or discuss the merits of an investment. A salary is fine; commissions are not.

The exam likes the unsolicited order. A customer calls, the registered representative is out, and the sales assistant offers to enter the trade. The assistant takes a message instead. An order is an order, solicited or not.

Ineligibility and statutory disqualification

Statutory disqualification is a status defined in Section 3(a)(39) of the Securities Exchange Act of 1934. A person or a firm in that status is ineligible for FINRA membership and for association with a member.

You are statutorily disqualified if any of these apply:

• An SRO or an exchange expelled, barred, or suspended you.
• The SEC or the CFTC denied, suspended, or revoked your registration, or barred you from association.
• A court enjoined you from acting as a broker, dealer, or investment adviser, or from conduct in the purchase or sale of a security.
• A court convicted you of any felony in the past 10 years.
• A court convicted you in the past 10 years of a misdemeanor involving securities, fraud, bribery, or perjury. Forgery, counterfeiting, extortion, wrongful taking of property, and money laundering count too.
• You willfully made a false or misleading statement in a registration filing.

A few rarer triggers also apply. They include a bar from a state regulator, an adverse finding from certain foreign regulators, and a willful violation of the securities laws.

Any felony counts, whatever it involved. A misdemeanor counts only when it involves money or securities. A drunk driving misdemeanor leaves you eligible. A shoplifting misdemeanor disqualifies you, because taking property wrongfully sits on the list.

Convictions age out after 10 years. A court injunction disqualifies you for as long as it stands.

A disqualified person can sometimes still work in the industry. The firm applies to FINRA, which may allow the association with conditions such as heightened supervision.

Background checks and fingerprinting

Your firm has to check you out before it files. FINRA Rule 3110(e) makes each member investigate an applicant's character, reputation, qualifications, and experience before the member applies to register that person. The firm must also search reasonably available public records within 30 calendar days after it files the Form U4.

Fingerprints go with the application. SEC Rule 17f-2 requires broker-dealers to fingerprint partners, directors, officers, and employees. The prints go to the FBI through FINRA, and that check surfaces the felony convictions behind statutory disqualification.

State registration

FINRA registration covers FINRA only. Each state has its own securities law, called a blue-sky law, and its own securities administrator. You register in every state where you do business, which usually means your own state plus every state where your customers live.

States test you separately. The Series 63 is the state law exam most firms pair with a FINRA exam.

When a firm lets someone do registered work without a registration, the firm and the person both violate the rules. The firm carries the duty to register its people.

Continuing education

Continuing education (CE) has two parts, and different bodies own them.

The Regulatory Element is FINRA's training, and it is annual. Every registered person completes it by December 31 each year, for each registration category they hold. Miss the deadline and your registration goes CE inactive. You then do no work that requires a registration until you finish.

The Firm Element is your firm's own annual training program. The firm runs a needs analysis and writes a training plan. It trains its registered persons on the products, services, and strategies it offers, plus the rules that apply.

FINRA sets the Regulatory Element and delivers it. Your firm sets the Firm Element and delivers that.

How this gets tested

Items here give you a person and ask whether they may act, or whether they may register at all. Sort them this way:

• If the task touches an order, a recommendation, or a commission, it needs a registration.
• Any felony in the past 10 years disqualifies. A misdemeanor disqualifies only when money or securities are involved.
• Annual, due December 31, and set by FINRA points to the Regulatory Element. Needs analysis, written by the firm points to the Firm Element.
• A question about doing business in another state points to that state's blue-sky registration, not to FINRA.