WealthManagement Magazine

State Regulators Ready Exam to Test Adviser Competency

Brokers could face yet one more state licensing test. The North American Securities Administrators Association (NASAA), the state regulators organization, is revamping the licensing procedures for what the states call "investment adviser representatives." NASAA says the new test could be required of all registered reps who also take the Series 65.The key change the regulators plan to implement will

Brokers could face yet one more state licensing test. The North American Securities Administrators Association (NASAA), the state regulators organization, is revamping the licensing procedures for what the states call "investment adviser representatives." NASAA says the new test could be required of all registered reps who also take the Series 65.

The key change the regulators plan to implement will be the introduction of new entry-level licensing examinations designed to test the basic financial competency of investment adviser reps.

"We've been looking to do this for some time," says Donald Reis, Nevada securities commissioner and head of the working group charged with creating the new exam.

The new exam, which is currently being created by an outside consulting group, should be ready by the end of 1998, according to Reis. Each state will decide whether to use it. NASAA, he says, hopes and expects states to adopt it as the standard for licensing.

However, the regulators aren't sure if the new test will become the single licensing standard and replace the current Series 65 exam, or if it will be used in conjunction with a revised Series 65.

"My guess is that we will use both," says Reis, "since the Series 65 covers a lot of key regulatory and procedural information."

State regulators haven't yet determined who will be required to take the new competency exam.

"I assume we will grandfather in many current practicing advisers, but whether that means all of them or only those who have been practicing for a set number of years remains to be seen," Reis says.

Since state regulators no longer share oversight of smaller investment adviser reps with the SEC, they will look to assist each other in field audits, a job formerly performed in conjunction with the SEC.

According to a recent NASAA notice, the organization will step up monitoring of advisers' advertising, marketing and Internet activity.

Implementation of the new exam and the general oversight of investment adviser reps will be discussed at the organization's upcoming meetings this month and next spring, according to Reis.

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