Financial Professionals Coalition, Ltd Endorses Ronald Filler, Esq's FINRA Petition for Direct Registration Exam

March 21, 2023

The Financial Professionals Coalition, Ltd. endorses a letter to FINRA authored by Ronald Filler, Esq, who is a Co-Founder of the Coalition, Professor Emeritus/Chair of the Ronald H. Filler Institute for Financial Services Law at New York Law School, and a Public Director of the National Futures Association (“NFA”). Filler petitions FINRA to eliminate the requirement that persons seeking to be employed in the securities industry must be sponsored by a Member Firm before they are allowed to take the Series 7 registration exam.

The Financial Professionals Coalition, Ltd. was founded in 2023 as a diverse resource for over 1.2 million registered representatives, associated persons, traders, bankers, back-office staff, and owners of broker-dealers and registered investment advisors. The Coalition provides courtesy consultations with industry experts. Membership is free.

RONALD FILLER
PROFESSOR EMERITUS
NEW YORK LAW SCHOOL
[Address Redacted]
EMAIL:  RONALD.FILLER@NYLS.EDU
CELL: (973) 495-8609

 

March 20,  2023

Corporate Secretary
FINRA
1735 K Street, NW
Washington, DC   20006

Re: Request for FINRA Rule Amendment Regarding the Series 7 Exam

Ladies and Gentlemen:

I am a Co-Founder of the Financial Professionals Coalition, Ltd., created on behalf of over 1.2 million registered representatives, associated persons, traders, bankers, back-office staff, and owners of broker-dealers (“BDs”) and registered investment advisers (“RIAs”). The Coalition is designed to serve as a clearinghouse of resources to help industry professionals navigate their careers, and to provide such services on a diverse and inclusive basis.  I am also a Professor Emeritus at New York Law School (“NYLS”) and the Chair of the Ronald H. Filler Institute for Financial Services Law at NYLS. Since 1977 through to December of 2019, I have taught a course on the Regulation of Brokerage Firms, among other similar financial services law courses, at different U.S. law schools. Further, I am a Public Director of the National Futures Association (“NFA”) and have served on its Board of Directors since 2010. The reason that I have prepared this letter is to respectfully request that FINRA please consider changing one of its registration requirements for securities registered representatives; namely, the rule which requires persons seeking to be employed in the securities industry to be sponsored by a Member Firm before they are allowed to take the Series 7 exam. As set forth on “Series 7 – General Securities Representative Exam” at https://www.finra.org/registration-exams-ce/qualification-exams/series7:

Eligibility

Candidates must be associated with and sponsored by a FINRA member firm or other applicable self-regulatory organization (SRO) member firm to be eligible to take FINRA representative-level qualification exams. For more information on registration requirements, refer to FINRA Rule 1210.

FINRA, and its predecessor, the NASD, have done a terrific job in establishing proper registration requirements and qualifications before firms and their representatives can hold themselves out to the public in their respective capacities. I commend FINRA in establishing these regulations and guidelines.  However, I believe that it is in the public interest, especially for smaller BDs, to allow persons desiring to be employed in the securities industry to take the Series 7 exam without having any pre-Firm sponsorship requirement.  

I believe this rule change is appropriate for the following reasons:

1. One can take the Series 3 exam without being firm sponsored and the state securities exams as well. The Security Industry Essentials (“SIE”) exam can be taken by anyone considering a career in financial services. Also, lawyers can take a bar exam and accountants can take the CPA exam without firm sponsorship. Similarly, the SEC allows investment advisers to do so. I believe that, for these same reasons, FINRA should amend its rules to allow persons to take the Series 7 exam without first being sponsored by a Member Firm.

2. Smaller BDs cannot always afford the costs to employ a potential representative if that person has not already completed the Series 7 exam. As a consequence, able and expert individuals who could have passed the exam cannot be recruited – a major disadvantage to the boutique BD.

3. Individuals desiring to work in the industry will have a better chance for employment, especially younger people, if they can take the Series 7 exam without Firm sponsorship and will thus be in a better position to be hired by a BD, especially the smaller BD discussed in bullet 2, above.  As we all know, the future of the BD industry rests with a large number of highly qualified registered representatives being employed in the industry.   Eliminating the Firm sponsorship requirement will further enhance the BD industry in my opinion. 

4. While I understand that allowing non-Firm sponsored individuals to be allowed to take the Series 7 exam may add additional pressure on the FINRA testing centers, FINRA could limit tests to be taken by such persons only on certain days of the week or even on certain months each year.

5. Related to bullet 4 above, the costs to take the Series 7 exam would be borne by the individual and not by Member Firms under such circumstances, which would increase the fees received by FINRA which, in turn, would allow for the expansion of the facilities to conduct the tests and accommodate additional test applications.

6. FINRA could also adopt rules that such persons, who are not sponsored by a Member Firm, cannot hold themselves out to the public that they are sponsored by a BD Member Firm or risk losing their Series 7 qualification.

7. Eliminating the Firm sponsorship requirement could feasibly eliminate the cottage industry of “parking” one’s registration, which, in my opinion, is not in the public interest. One could now hold his/her own Series 7 registration and make himself/herself possibly available for future employment by a BD.

8. Persons who have been away from the industry for more than 5 years could now take the Series 7 exam and thus be in a better position to join a BD if they so desire to rejoin the industry.

9. The number of BDs have considerably decreased over the past 20 years.  By amending the Series 7 qualification rule, FINRA will be assisting all of its Member Firms, especially the smaller BDs.

10. The proposed change would not prevent a Member Firm from still sponsoring a person to take the Series 7 exam, it just eliminates the mandatory Member Firm sponsorship.

11. I do not believe the public interest will be adversely affected if this qualification requirement be changed to allow persons to take the Series 7 exam without first being Firm sponsored.

For all of these reasons, I respectfully request that FINRA consider amending its rules to allow persons to take the Series 7 exam whether or not such persons are Firm sponsored.  I welcome the opportunity to meet with FINRA to discuss this proposal further.

Thank you for considering this request.

/Ronald H. Filler/

Co-Founder, the Financial Professionals Coalition, Ltd
Professor Emeritus – New York Law School

Cc:  Robert Cook
       Robert Colby