Series 63 Law Exam

Uniform Securities Agent Test

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The Series 63 exam, also known as the Uniform Securities Agent State Law Examination, is required by most states for securities agents. These are financial professionals involved in selling investment products to the general public, such as financial advisors. For financial advisors, the Series 63 generally is needed in addition to the Series 7. Passing the Series 63 exam demonstrates minimum familiarity with state securities laws and regulations as embodied in the Uniform Securities Act.

Note, however, that the leading securities brokerage firms normally hold their financial advisors to a much higher standard of knowledge, and thus demand that they pass the more comprehensive Series 66 exam rather than the more basic Series 63. For firms with a national footprint, enforcing this higher standard also ensures greater uniformity in the quality of their sales forces, and facilitates possible moves of financial advisors across state lines, including moves into states that require the Series 66.

The Series 63 exam is prepared by the North American Securities Administrators Association (NASAA), while the actual testing is administered by FINRA. NASAA is an organization representing the common interests of state securities administrators or regulators. These administrators are the persons in state governments with primary responsibility for enforcing the Uniform Securities Act, and they hold various titles, among them being "Commissioner," "Director" or "Secretary of State for Securities."

The Uniform Securities Act

This a piece of model legislation developed in 1956 and adopted by most states in an attempt to harmonize and standardize securities regulation nationwide. In this sense, model legislation means a bill proposed for passage in various jurisdictions as written, without changes or amendments.

A revised 2002 version of the act has been adopted by a few states.

The North American Securities Administrators Association

The North American Securities Administrators Association was organized in Kansas in 1916, antedating the seminal federal securities acts passed in 1933 and 1934. From its founding, NASAA began encouraging the various states to adopt model securities laws. Broadly stated, the primary goals of NASAA from its inception have been protecting the investing public from fraud and increasing the professional ethics, quality, and competency of securities industry professionals who sell securities to the public.

Blue Sky Laws

The body of state legislation regulating the securities industry, including the Uniform Securities Act, has long been nicknamed the "Blue Sky Laws." The derivation of this phrase comes from a remark by a justice of the Kansas Supreme Court early in the 20th century, criticizing investment schemes and scams that were backed by nothing more than "... so many feet of blue sky."

Content of the Exam

The Series 63 exam consists of 65 multiple choice questions and takes 75 minutes. It tests knowledge of state securities regulation in general, and the Uniform Securities Act in particular.

Only 60 of these questions actually count towards the candidate's score. The other 5 are experimental questions being considered for inclusion in future versions of the exam. The test taker does not know which questions are the experimental ones that do not count.

Passing the Exam

The passing score is 72%, or 43 correct answers. There is no penalty for wrong answers, so candidates should enter a guess whenever they are unsure of the correct response.

A candidate who fails the Series 63 exam must wait at least 30 days before taking it again. The same rule applies to someone who has failed a second time and who wishes to take it a third time. After a third failure, a candidate must wait at least 180 days before taking the exam again. This same rule applies to all subsequent failed attempts.

Getting Registered and Licensed

There are several caveats related to passing the Series 63 exam.

First, the candidate is still responsible for knowing and adhering to the specific requirements of the securities laws and regulations of the states in which he will conduct business. Second, while passing the exam often is a key prerequisite to being licensed to do business in a particular state, it is not necessarily the only one, and never confers an automatic right to be licensed or registered in a given state. Nevertheless, the NASAA firmly believes that the Uniform Securities Agent Law Examination makes for better state securities regulation and better protection of the investing public by promoting uniformity in such regulation and in the qualification standards for financial professionals.