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If you make stock trades for yourself only, usually no licensing is required.
But if you want to make trades for other investors, licensing is required through the National Association of
Securities Dealers (NASD). Interestingly, to be a licensed professional trader through NASD,
no formal education requirements exist, but you will need brokerage sponsorship, industry employment and a passing
score for at least one long exam.
A stock broker is an investment professional who makes trades with market makers
on behalf of investors. There are many other types of jobs in the securities industry
that require specific licensing. For example, to become a CFO of a NASD company, you will
need to take the Series 27 exam. To become an investment analyst you'll need to take the Chartered Financial Analyst exam
given by the CFA Institute.
In the wide range of the securities industry there corresponds a wide range of licensing.
All of these licenses involve taking a lengthy exam issued by NASD. Most of these exams require
at least 70% accuracy to pass. The most common exam - and the bare minimum requirement to become a stock broker - is
the Series 7 exam, also known as the General Securities Registered Representative
Examination. In some states additional licenses are required. Before you are allowed to
take the exam, you must also be sponsored by a NASD firm and must be employed with them for at
least four months.
Another exam that many states require for entering the brokerage industry is the Uniform Securities
Agents State Law Examination, also known as the Series 63 exam. Even after gaining these two important credentials,
in most cases you will start as a trainee and after a few years of education be promoted to a broker. Another
requirement in some states is the Uniform Combined State Law Examination, also known as the
Series 66 exam, which tests the knowledge of those pursuing careers as securities agents and
investment advisors.
Each exam takes several hours, with the Series 7 exam taking up to six hours.
Here is a list of the different emams for gaining licensure in the securities industry:
Series 3 - for options, commodities and futures trading: exam includes questions about hedging.
Series 4 - for options sales management personnel: exam involves options and taxes.
Series 6 - for limited trading outside of corporate and municipal instruments: exam tests a wide
range of knowledge that includes investment companies, taxes, regulations and investment risk.
Series 7 - for any investment professional representing financial interests of others:
exam covers stocks, bonds, options and a wide range of other market knowledge,
but does not include futures or commodities.
Series 9/10 - for those aspiring to be branch supervisors: exam is all about supervision in the options market
as well as supervision of government securites.
Series 24 - for those seeking branch manager positions: exam is made up of questions about securites regulations, REITS
and trading.
Series 26 - for limited principal supervisor/managers of investment companies and annuities: exam is for those who already hold Series
6 and 7 licenses.
Series 27 - if you want to be a CFO of a NASD member: exam includes NASD and SEC rules, understanding balance sheets
and other accounting tools.
Series 30 - Futures branch officer manager: exam will test knowledge of the futures industry.
Series 31 - Futures and fund manager: more about the futures industry.
Series 55 - for active equity traders.
Series 63 - for securities agents, also known as the Uniform Securities Agent State Law Examination.
Exam questions are based on the Uniform Securities Act.
Series 65 - for investment advisors.
Series 66 - for securities agents and investment advisor representatives (you'll need 71% to pass). It's also
known as the Uniform Combined State Law Examination.
