New Investment Adviser Exam Seen by Mid-1999

If state securities regulators have their way, the Series 65 could be replaced with a new exam shortly after the New Year. The exam, designed to replace the 10-year-old Series 65 test, which critics claim does little more than test an advisers knowledge of state laws, is intended to flag what regulators have called insufficient knowledge of products and investments on the part of many advisers.Currentiy

If state securities regulators have their way, the Series 65 could be replaced with a new exam shortly after the New Year. The exam, designed to replace the 10-year-old Series 65 test, which critics claim does little more than test an advisers knowledge of state laws, is intended to flag what regulators have called insufficient knowledge of products and investments on the part of many advisers.

Currentiy we only test advisers on their knowledge of state law, says Donald Reis, Nevada securities commissioner and the head of the committee charged with creating and implementing the new exam. What we really want to assure is that they know what they are talking about when it comes to investments and investment products.

According to Richard Cortese, Vermonts top securities regulator and vice chairman of the project, there is an increasing concern on the part of regulators that many investors are getting less than top-flight advice from the growing numbers of advisers. Many investment advisers have minimal amounts of investment knowledge, he says. This isnt a blanket indictment of all advisers. Its merely a mechanism to assure investors that anyone who claims to be a licensed adviser really knows what theyre talking about.

Still strongly opposed to the exam are Investment Company Institute (ICI) officials who clalm that the adviser industry is too diverse for a standardized exam to have much meaning. In a letter sent this sumrner to state regulators, ICI officials sald they had serious doubts about a persons competency being measured by a one-size-fits-all examination.

Reis says that with increasing numbers of investors turning toward investment advisers, the industry will have to find a way to live with the examination. Once finalized, the new test will be required for all investment advisers who are regulated by the states--those with assets under management of $25 million or less. State regulators say they regulate about two thirds of all investment adviser reps.

State regulators also note that advisers who have been practicing for a significant number of years will likelv be exempt from the new exam. However, they have yet to detennine the exact qualifications for exemption.

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