Series 63 vs. Series 65 vs. Series 66: An Overview
When a person is preparing to enter the world of investment professionals, they must take—and pass—qualification examinations. Often before the individual is prepared to fully function in their profession, there are multiple examinations that must be successfully negotiated.
Once the prospective registered representative has passed the first “core” examination—usually the Financial Industry Regulatory Authority (FINRA) Series 6 or Series 7—at least one more hurdle remains the Series 63, 65 or 66. A question in the minds of many is, “Which one do I need to pass?” In this article, we’ll show you how you can answer this question for yourself.
- An individual who wishes to enter the world of investment professionals must first pass a number of exams regulated by the Financial Industry Regulation Authority.
- Those who wish to be IARs must pass the Series 66 and the Series 7.
- The Series 66 exam, the newest of the three, is equivalent to taking both the Series 63 and Series 65.
- There are no prerequisites for the Series 63 exam, however, in order to take the Series 66, the individual must first pass the Series 7.
- These exams help ensure financial advisors have a firm grasp of the financial industry’s laws and best practices.
The Difference Between Series 63, 65 and 66
In most states, a new registered representative must—at a minimum—pass the Series 63 to satisfy state law registration requirements. The Series 63 (formally known as the Uniform Securities Agent State Law Examination) consists of 60 questions. The exam has a time limit of 75 minutes. The exam focuses on the registration of persons and securities under the USA and ethics in the securities industry.
In order to achieve a passing status on the Series 63, the respondent must answer 43 of the 60 questions correctly or score a 72%. The exam was created in 1979 and costs $147 to take. According to NASAA, there are technically 65 questions on the Series 63, however, “of the 65 questions on the exam, 60 will count toward the final score. The remaining five questions are being pre-tested for possible inclusion in the operational question bank. These questions may appear anywhere in the exam and are not identified.”
NASAA also provides candidates with a study guide for the Series 63. You can access this on the organization’s website.
Recently NASAA has provided candidates with the ability to use their personal camera-equipped computer to take qualifications examinations. For more information, see NASAA’s website.
The first examination created by NASAA to test the competency of individuals who wish to provide fee-based investment advisory services was the Series 65. At the time, it focused primarily on the Uniform Securities Act, NASAA amendments, and ethical practices in the securities industry.
The Series 65 exam underwent a dramatic change that became effective in 2000. It had long been a 75-question exam that focused primarily on state securities laws (the Uniform Securities Act) and ethics but became a 130-question “competency exam” with a time limit of 180 minutes. Like the Series 63, the Series 65 exam has experimental questions that will be included in every test—there are 10. To pass the exam, the candidate must answer 94 of the 130 questions correctly (72%).
Currently, the majority of those who take the Series 65 are either securities professionals who have not passed the Series 7 General Securities Representative Exam, or those in related fields within the financial services industry—such as accountants—who wish to be in the business of providing investment advice for fees. This includes, of course, those who work for investment advisory firms and wish to become IARs.
The Series 66 exam is relatively new. It was created by NASAA in response to requests from broker-dealers and other financial services firms. It is essentially a combination of Series 63 and Series 65, but since a prerequisite for taking the exam is successful completion of the Series 7 exam, it does not include the product, analysis, and strategy questions that are a large part of the Series 65.
The Series 66 test is 100 questions that count towards the candidate’s score and 10 pretest questions. The time limit for the exam is 150 minutes. To pass the exam, a candidate must correctly answer 73 (73%) of the questions.
To avoid overlap with the Series 7, NASAA assembled a committee of securities industry experts to eliminate questions in the Series 66 that would be duplicative of those in the Series 7. As a result, the Series 66 exam is considered by most to be an “easier” test. It will, like the Series 65, qualify the individual to act as an IAR, and it fulfills the requirements of the USA for state registration. Note that candidates can take the 66 or 7 in any order, but both must be completed in order to register.
There are exam fees for these exams that must be paid before taking them. If you work for a financial firm, it is not uncommon for your employer to cover these costs.
All three of these examinations were created by the North American Securities Administrators Association (NASAA) and are administered, under contract from that organization, by the FINRA, formerly known as NASD.
NASAA, as the name indicates, is an organization of securities administrators. The term “administrator” is a generic title used to indicate the person who is responsible for enforcing the Uniform Securities Act in a state. In various states, this person is called “commissioner,” “director,” or “Secretary of State for Securities.”
NASAA, as an organization, actually predates the major federal securities laws, such as the Securities Act of 1933 and the Securities and Exchange Act of 1934. It was formed in Kansas in 1919 and made its first efforts at standardizing the securities laws of the states shortly thereafter. The organization’s goals included protecting the public, and it drafted model laws. These laws could be adopted by the individual states to prevent fraud and register the persons involved in the securities business.
A Kansas Supreme Court justice, in the early days of securities regulation, was quoted as saying that people were coming into his state and selling schemes that had no more substance than “so many feet of blue sky.” The Uniform Securities Act has, as a result, been commonly referred to as the “Blue Sky Laws.”
IARs and Investment Providers
Investment advisor representatives (IARs) are individuals employed by an investment advisor who make recommendations or otherwise give financial or investment advice to clients. The IAR’s relationship to the investment advisory firm is similar to that of an agent who works for a broker-dealer.
NASAA’s Memorandum of Understanding (MoU) from 1997 on this subject deals with both the federal-covered investment advisor (a firm registered with the SEC) and the investment advisor representatives who work for the firm.
“If an investment advisor is registered with the SEC, the states may not require registration, licensing, or qualification of the investment advisor or its supervised persons, except that states may license, register, or otherwise qualify investment advisor representatives who have a place of business located within that state.”
This MoU refers to the National Securities Markets Improvement Act of 1966 (NSMIA) and lays out the requirements for testing persons who are to be IARs. In order to avoid costly penalties, investment advisory firms must ensure their IARs are registered correctly.
After the IAR meets the registration requirements they must pass the appropriate exams before providing any client financial advice. State requirements vary on this point, however, in most cases, the IAR must pass either both the Series 63 and Series 65 or the Series 66 exam, as well as the Series 7.
How Long Does It Take to Study for the Series 63, Series 65, and Series 66 Exams?
While studying needs will vary between candidates, many firms that specialize in the Series 63 exam recommend devoting anywhere from 30 to 50 hours of studying for these exams. Because the Series 65 and 66 exams are longer, many recommend devoting 80 to 100 hours to studying.
Is It Harder to Pass the Series 65 or Series 66 Exams?
While the pass/fail rate for these exams is not publicly available, many consider the Series 66 exam less difficult than the Series 65 because the latter is longer. The Series 65 contains 130 questions and the Series 66 has only 100.
What Does a Series 65 Allow You to Do Versus a Series 7?
The Series 65 enables a financial professional to give clients investment advice and analysis. If the professional wishes to sell packaged investment products or to buy and sell securities they must pass the Series 7.
The Bottom Line
Passing the Series 63 exam for registration within a state is a requirement for all registered representatives. Those who wish to be IARs must pass the Series 66 and the Series 7. The Series 66 is equivalent to taking both the Series 63 and Series 65. If an individual does not already have a Series 7 and wishes to be an IAR, the Series 65 is NASAA’s competency exam.