In the United States and other countries throughout the world, the definition of what constitutes a securities transaction is often misunderstood. In the US, the test of what is, or isn’t, a security is rooted in decisions handed down from the highest cour ts and applied by Federal and State regulators with jurisdiction over the securities industry.

Investment bankers, private equity firms, and professionals working with mergers, acquisitions, and debt and equity capital raising are often left to decide whether or not their activities could be subject to regulatory scrutiny. The risks of enforcement sanctions are potentially devastating to those who might fail to consider if their activities are exposed to FINRA or SEC requirements.

One prudent way to resolve the regulatory risk is for investment bankers and other professionals to consider working with an established FINRA member who would sponsor them for FINRA registration. But how do you know which FINRA qualification is right for you and your business? Are investment bankers better off taking the Series 79 examination or the Series 82?

Getting Started: The Securities Industry Essentials Exam

The first step in the registration process is to take and pass the SIE exam. A candidate does not need to be sponsored by a FINRA member to take the examination. The SIE tests common
topics such as fundamentals, regulatory agencies and their functions, product knowledge, and acceptable and unacceptable practices. Professionals who pass the SIE have a four-year
window to pass a FINRA examination, such as Series 79 or 82.

The next question is whether you choose Series 79 or Series 82.

Series 79

To take the Series 79 exam, you must be sponsored by a FINRA member firm. The exam is challenging and requires diligent study and planning. Exam prep and review course materials
are available and will go a long way in increasing your chance for success on the first try. The exam is divided into three broad job functions that are generally required to be a successful Investment Banking Representative.

● Function 1 is “Collection, Analysis, and Evaluation of Data” and represents 47% of the exam questions.
● Function 2 is “Underwriting and New Financing Transactions, Types of Offerings and Registration of Securities,” making up another 27% of the exam.
● Function 3 is “Mergers and Acquisitions, Tender Offers and Financial Restructuring Transactions,” rounding out the remainder of the exam.

The questions on the Series 79 exam emphasize tasks such as advising on or facilitating debt or equity offerings through a private placement or public offering and advising or facilitating
mergers and acquisitions, tender offers, financial restructurings, and asset sales. The passing score is 70 percent and above. Once you pass, you’ll be licensed.

Series 82

Like the Series 79, you must be sponsored by a FINRA member firm to take the Series 82. It is also a complex and challenging exam and needs to be taken seriously.

The Series 82 gives its holder the authority to conduct private securities transactions, among other activities. The exam is also known as the Private Securities Offerings Representative Exam. The exam is broken down into four sections.

● Section One is “Characteristics of Corporate Securities.” This section tests candidates on equities, debt, asset-backed securities, real estate investment trusts, common stock, preferred stock, and rights and warrants. It also covers investment companies, how they are structured, and the different fund variations.

● Section Two is “Regulation of the Market for Registered and Unregistered Securities.” This section focuses on the private placement mechanisms involved with securities. It also covers underwriting commitments, financing proposals, distribution, and pricing.

Other topics discussed in this section include trading and transactions, the marketing and advertising of private placements, and regulations under the Securities Act of 1933 and the Securities Exchange Act of 1934.

● Section Three is “Analyzing Corporate Securities and Investment Planning.” The section tests the candidates’ analysis of corporate securities. This section also covers cash flow statements, balance sheets, and income statements for equity securities. Similarly, the section also includes debt analysis, including bond ratings, call provisions, interest rate risk, and yield curves.

In addition, it covers comprehensive market topics, such as fiscal policy, the role of the Federal Reserve, and the economy. This section also discusses investment planning features like suitability, investment objectives, risk, portfolio construction, constraints, and tax treatment.

● Lastly, Section Four is “Handling Customer Accounts and Industry Regulations.” This section covers account documentation and regulatory expectations. It also discusses FINRA rules, client account forms, documentation, investment disclosures, and regulatory filings with the Securities and Exchange Commission.

So, Which Is Right for You?

Your business plans and design will dictate which exam is more appropriate for you. Before you get started, research and contact FINRA member firms that specialize in investment banking, private equity, and mergers and acquisitions that sponsor candidates for either exam. Their registration and compliance professionals can talk you through the pros and cons of each approach and help you make the best decision for your practice.

For more information, reach out to Bridge Capital Associates today.