This article explains the job responsibilities of a FINRA registered representative and highlights the distinctions between them and investment adviser representatives. The procedures you must follow to become a registered representative will also be explained.
What Is a Registered Representative?
The term “registered representative” (RR) describes a person who is sponsored by a company registered with the Financial Industry Regulatory Authority (FINRA) and has the authorization to purchase and sell securities on behalf of clients. Registered representatives are referred to as “stockbrokers” more commonly.
The SEC and FINRA oversee registered representatives and mandate their passing of licensing exams. Moreover, RRs have to follow the appropriateness standard. Before an investment is suggested to an investor by a company, it must satisfy the appropriateness requirements specified in FINRA Rule 2111. The question, “Is this investment appropriate for my client?” must be answered in the affirmative.
Registered Representative Jobs
In the trading of financial instruments, including stocks, bonds, and mutual funds, registered representatives act as clients’ agents. Many deal with intricate trades or products that are too complex for Internet commerce. Market experts seek out the best deals and securities to provide clients with expert advice on purchasing, selling, and trading. They receive payment in the form of a commission according to a percentage of the transaction value or a fixed fee. As a result, a registered representative possesses strong interpersonal and sales skills.
In addition to the appropriateness standards, registered representatives must follow rules set forth by the SEC and FINRA. According to the appropriateness criterion, a registered representative may only suggest assets that fit the needs and objectives of their clients and enhance their portfolios. Notwithstanding the client’s financial objectives and risk tolerance, a registered representative may suggest a transaction if they discover an investment product that will generate profits for them.
Registered Representative vs. Investment Adviser Representative
An investment adviser representative (IAR) is a person who works for an investment advisory firm or company and also provides financial advice. The licenses that IARs hold restrict the legal advice they can provide. IARs typically hold positions as asset managers, wealth managers, investment advisors, and portfolio managers. A large number of people hold Series 65 licenses.
In contrast, registered representatives purchase and sell stocks, bonds, mutual funds, and other financial products on behalf of clients, for their firm’s accounts, or both when working with broker-dealers or brokerage firms. Registered representatives usually have to do with securities licenses in Series 7 and Series 63.
Procedures for Becoming a FINRA Registered Representative
The procedures for becoming a registered representative are as follows:
- Examine for and pass the SIE. Taking this exam, which covers fundamental principles in the security business, is the first step toward obtaining your Series 7 and Series 63 licenses.
- Get a job and sponsorship from a company that holds a FINRA license.
- Sign up and also get ready for the Series 7 test. Your sponsoring broker must apply on your behalf via FINRA’s CRD system. A 120-day testing period starts following FINRA’s approval of the application. To secure your preferred date and sufficient study time, it is advisable to book your exam as long in advance as feasible.
- Take the Series 7 exam and pass it.
- Enroll in, get ready for, take, and also pass the Series 63 test.
You will be authorized and sponsored to purchase and trade stocks on behalf of your company, individual clients, or both once you have finished these procedures.
What Kind of Securities May Be Sold by a FINRA Registered Representative?
A general securities representative can sell a broad range of securities, such as investment firm securities, corporate and municipal securities, variable annuities, and government bonds. Certain FINRA tests, like the municipal bond exam, exclusively permit the sale of a single class of securities.
Past Actions That May Disqualify You
A person’s membership or registration may be put on hold, or several things may happen to them that prevent them from becoming a registered representative.
As per FINRA, the Securities Exchange Act of 1934 may impose a “statutory disqualification” on you if you:
- were found guilty of a crime and/or pleaded guilty or not guilty.
- Found guilty or charged with a misdemeanor about investments that involved bribery, extortion, fraud, or other unethical acts.
- Determined to have violated sales practices in arbitration or civil lawsuits that you were involved in.
- Obtained a final decision prohibiting you from associating with that authority or from conducting business in securities, insurance, banking, or other financial services, from a state securities commission, federal banking agency, state authority, etc.
- Engaged in dishonest, coercive, or misleading behavior that contravened any relevant laws or rules.
- Had their registration suspended or revoked from their position as a federal contractor, attorney, or accountant.
- Declared bankruptcy throughout the previous ten years.
- Made a fraudulent claim or left out important details.
Be aware that the disclosure questions on FINRA Form U-4 are condensed into the items that come before them. FINRA also provides a comprehensive explanation of the statutory disqualification process.
FAQs
What makes you qualified to serve as a registered representative?
A financial practitioner qualified to handle client transactions in the securities markets is also known as a registered representative (RR). RRs are subject to stringent licensing requirements, which include passing the Series 7 and 63 tests and also adhering to SEC and FINRA regulations.
What is the setup fee for an RIA?
Depending on variables such as state registration fees, legal and compliance consulting fees, technology expenditures, and operating expenses, startup costs might vary from $10,000 to $50,000. Documentation necessary for legal formation is also a common initial cost.
Which two categories of financial counselors exist?
The bulk of financial advisors are individuals and families; they can be divided into three groups: investment advisors, professionals who hold the Certified Financial Planner (CFP) designation, and Registered Representatives (RRs), formerly known as stock brokers.
Registered Representative: Summary
Being a registered representative requires a lot of labor, but the job is also fulfilling and gratifying. It’s a terrific idea to take the SIE exam, and studying with a package can improve your chances of passing. Enrolling in a bundle that prepares for both the SIE and Series 7 exams is an additional alternative that will ultimately result in cost savings.
