Today marks the first day that current Series 7 licensed representatives of BDs who engage in “investment banking activities” can opt in to the Series 79 license.  Current Series 7’s will need to talk with their compliance department who will be able to complete a Form U4 update for the rep.  According to a FINRA representative I talked with last week, the opt in process will be very easy – essentially the compliance person for the BD will go into the CRD system, check the Series 79 box for the appropriate BD reps and then submit the revised U4 to FINRA.

Reps who engage in investment banking activities should make sure that they have opted in before May 3, 2010 or they will be required to take the exam which is 5 hours long (175 multiple choice questions).

Series 79 Articles

• Regulatory Notice 09-41 – this article reprint’s FINRA’s notice to members.  Notice includes: background and discussion on exam, discussion of the opt in period, information on the training program exception, information on requirement for principals, outline of content, registration procedures, effective date and FAQs.
• Series 79 Content Outline – FINRA’s content outline for the new exam.  Provides an overview of the major categories and sub-categories which will be tested.
• Series 79 Questions and Answers – in this article we address some of the questions which have been posed to us regarding the new investment banking exam.

Other related hedge fund law articles include:

• Series 7 Exam
  
• Seres 79 Exam
• Hedge Fund

Bart Mallon, Esq. of Mallon P.C. runs Hedge Fund Law Blog and can be reached directly at 415-868-5345.

Pursuant to a proposal set forth by FINRA in February of this year, it is anticipated that the Series 79 will be introduced as a simplified alternative exam for investment bankers. Prior to the introduction of this new exam, all registered representatives were required by NASD Rule 1032 to take the Series 7 exam. The proposal modified this Rule to condense the exam for those individuals whose activities are limited to investment banking. The primary reason behind the FINRA proposal for a new abridged exam was that the Series 7 exam covers a broad array of functions that do not pertain to the day-to-day activities of an investment banker.

On July 13, 2009 we contacted FINRA to determine what information, if any, has been released on the new Series 79 exam.  According to FINRA, the SEC has approved the proposal set forth by FINRA as of April of this year, but SEC approval on the content of the exam and related fees is still pending. Thus, there is limited information available to prospective exam takers regarding the proposed content of the exam, the timeline for required registration, the release of related study materials and/or course offerings, and related exam fees.  Once the SEC issues its approval, a formal press release will be issued to the public regarding the structure of the exam as well as an expected date as to when the modified NASD Rule 1032(i) will be enforced, thereby establishing the Series 79 as the new license requirement for investment bankers.

All information regarding the Series 79 Exam will be available on this site for prospective exam takers once it is formally approved by the SEC.

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If you have any questions regarding the Series 79 Exam or would like to start a hedge fund, please contact us.

On February 17, 2009, FINRA announced a new proposed category for investment banking professionals – Limited Representative-Investment Banking (“Series 79”). On April 13, 2009 the SEC issued an order approving the proposal.  Pursuant to the original NASD Rule 1032, a person who functions as a registered representative must pass the General Securities Representative (Series 7) examination. The proposed rule, Rule 1032 (i), now modifies this requirement to allow certain individuals who qualify under the new limited representative category to take the Series 79 as a simpler alternative. The new Rule 1032(i) is intended to substantially condense the examination prerequisite for those individuals whose activities are limited to investment banking, and will likely become effect in late 2009 or early 2010.  After weighing out the effects of this new initiative, the Commission believes that the rule change will allow FINRA members to more efficiently allocate resources in order to better train their specialized personnel, which ought to result in improved compliance by principals and the employees they supervise.

When this new rule becomes effective, investment bankers will no longer be required to take the extensive Series 7, which covers many aspects of securities regulation that are irrelevant to most investment bankers. As an alternative, bankers who intend to register with a registered broker-dealer will required to take a smaller test covering specific day-to-day functions that they will likely perform on the job, including:

1. Public/Private Offerings:   Advising on or facilitating debt or equity securities offerings through a private placement or public offering. Such services would include but not be limited to origination, underwriting, marketing, structuring, syndication, pricing, allocation and stabilization activities for such offerings. This definition includes those working on equity and debt capital markets and syndicate desks.
2. Issuer Transactions:  Advising on or facilitating mergers and acquisitions, tender offers, financial restructurings, asset sales, divestitures or other corporate reorganizations or business combination transactions. The scope of such covered activities includes but is not limited to rendering fairness, solvency and similar opinions. The Series 79 registration will not be available to persons whose investment banking work is limited to public (municipal) finance offerings.

Among those exempt from taking the Series 79 include those associated persons who perform functions that are limited to:

1. Advising on or facilitating the placement of direct participation program securities (who would be instead required to take the Series 22); or
2. Effecting sales of private placements (who would be instead required to take the Series 82)

The Alliance of Merger & Acquisition Advisors (AM&AA) has advocated for years the adoption of a more appropriate & simplified system of regulatory rules for the securities industry, with the primary goal of helping the lower middle market achieve compliance without hindering the protection of investors.  As small-to-medium sized business make up 85% of the US GNP, they would not stand to benefit from a rigid regulatory system that may restrict their ability to use financial intermediaries by imposing difficult, overly broad pre-requisites such as the Series 7 exam. The AM&AA hopes that this new condensed, ‘function-focused’ exam will lessen the burden on smaller businesses while maintaining long-term investor confidence.

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We will be contacting FINRA to determine what information, if any, has been released on the Series 79 Exam, including: proposed content, exam topics, study guides, course offerings, fees, and timeline for required registration.

If you have any questions regarding the upcoming Series 79 exam, or would like to start a hedge fund, please feel free to contact us.

Relief for Investment Bankers  – New FINRA Rule Adopts Simplified Series Exam for Qualified Persons

On February 17, 2009, FINRA announced a new proposed category for investment banking professionals – Limited Representative-Investment Banking (“Series 79”). On April 13, 2009 the SEC issued an order approving the proposed rule and related fees.  Pursuant to the original NASD Rule 1032, a person who functions as a registered representative must pass the General Securities Representative (Series 7) examination. The proposed rule, Rule 1032 (i), now modifies this requirement to allow certain individuals who qualify under the new limited representative category to take the Series 79 as a simpler alternative. The new Rule 1032(i) is intended to substantially condense the examination prerequisite for those individuals whose activities are limited to investment banking, and will likely become effect in late 2009 or early 2010.  After weighing out the effects of this new initiative, the Commission believes that the rule change will allow FINRA members to more efficiently allocate resources in order to better train their specialized personnel, which ought to result in improved compliance by principals and the employees they supervise.

When this new rule becomes effective, investment bankers will no longer be required to take the extensive Series 7, which covers many aspects of securities regulation that are irrelevant to most investment bankers. As an alternative, bankers who intend to register with a registered broker-dealer will be required to take a smaller test covering specific day-to-day functions that they will likely perform on the job, including:
1.    Public/Private Offerings:   Advising on or facilitating debt or equity securities offerings through a private placement or public offering. Such services would include but not be limited to origination, underwriting, marketing, structuring, syndication, pricing, allocation and stabilization activities for such offerings. This definition includes those working on equity and debt capital markets and syndicate desks.
2.    Issuer Transactions:  Advising on or facilitating mergers and acquisitions, tender offers, financial restructurings, asset sales, divestitures or other corporate reorganizations or business combination transactions. The scope of such covered activities includes but is not limited to rendering fairness, solvency and similar opinions. The Series 79 registration will not be available to persons whose investment banking work is limited to public (municipal) finance offerings.
Among those exempt from taking the Series 79 include those associated persons who perform functions that are limited to:
1.    Advising on or facilitating the placement of direct participation program securities (who would be instead required to take the Series 22); or
2.    Effecting sales of private placements (who would be instead required to take the Series 82)
The Alliance of Merger & Acquisition Advisors (AM&AA) has advocated for years the adoption of a more appropriate & simplified system of regulatory rules for the securities industry, with the primary goal of helping the lower middle market achieve compliance without hindering the protection of investors.  As small-to-medium sized business make up 85% of the US GNP, they would not stand to benefit from a rigid regulatory system that may restrict their ability to use financial intermediaries by imposing difficult, overly broad pre-requisites such as the Series 7 exam.
The AM&AA hopes that this new condensed, ‘function-focused’ exam, if approved by the SEC, will lessen the burden on smaller businesses while maintaining long-term investor confidence.  More information on the content of the exam, related fees & registration dates, and related links will be available soon on www.series79exam.com.
If you have any questions regarding the upcoming Series 79 exam, or would like to start a hedge fund, please feel free to submit all related inquiries to: bart@hedgefundlawblog.com.