The author is a freelance journalist and Google News PR specialist. He can be reached at contact@sitetrail.com. -- Ed.
In a recent report on CNBC, it was stated that China will continue to allow Chinese companies to go public in the United States, as long as they meet listing requirements. If insurance policies tied to investments are intended to be marketed or sold, the marketer or seller would need to obtain a security license. Fully licensed financial representatives have undergone a range of examinations and registrations to obtain their licenses, which will be explored in this article.
What is a security license?
A security license is the type of license that allows financial representatives to sell different types of investments. It also determines the amount which is expected to be paid and the level of service the license holder is able to provide to their clients. There are two types of security licensing organizations, namely the Financial Industry Regulatory Authority (FINRA) and those from the North American Securities Administrators Association (NASAA). These organizations offer multiple different security licenses for financial representatives. For a financial representative to be fully licensed to sell and market mutual funds, variable annuities, variable life insurance, unit investment trusts, and municipal fund securities, they would need a combination of licenses from FINRA and NASAA.
FINRA Licenses
FINRA has the responsibility of overseeing securities licensing procedures and requirements. The self-regulatory organization offers a range of exams which bestow financial representatives an array of security licenses. The different types of licenses offered by FINRA correspond to a specific type of business or investment that a financial representative may plan to market and/or sell. The most commonly obtained FINRA security licenses obtained by financial representatives are the Series 6, Series 7 and Series 3 licenses:
Once a representative has obtained a Series 6 license, also known as the limited-investment securities license, they would be able to sell and market mutual funds, variable annuities, unit investment trusts as well as variable products.
Once a representative has obtained a Series 7 license, also known as the general securities representative (GS) license, they would be able to sell and market any type of individual security. Examples of individual security are common and preferred stocks, call and put options, bonds and other individual fixed income investments, as well as all forms of packaged products.
Once a representative has obtained a Series 3 license, they would be able to sell and market commodity futures contracts.
NASAA Licenses
NASAA has a multifaceted mission to protect investors from fraud and abuse. The organization offers a range of exams which bestow financial representatives an array of security licenses. NASAA also offers education, guidance and assistance to investors, via the regulatory framework. The most commonly obtained NASAA security licenses obtained by financial representatives are the Series 63, Series 65 and Series 66 licenses:
Once a representative has obtained the Series 63 license, also known as the Uniform Securities Agent license, they would be able to transact business within their state.
Once a representative has obtained the Series 65 license they would be able to provide financial advice or service on a non-commission basis.
Once a representative has obtained the Series 66 license they would have the benefits offered from both the Series 63 and Series 65 license.
The Broker-Dealer Sponsorship
Once financial representatives have obtained their required security licenses, they need to register their security license/licenses with an approved broker-dealer. The function of the broker-dealer is to hold their licenses and oversee their businesses for a portion of the license holder’s income. Financial representatives who want to act as a Registered Investment Advisors need to register with the state if their assets under management are less than $25 million. Registered Investment Advisors would not have to associate themselves with a broker-dealer.
The Bottom Line
Most aspiring security license holders who are employed by a financial and investment company will have the opportunity to enroll in a mandatory licensing program in the training package. The companies often select which licenses their employees need to obtain to sell the company's products and services. If aspiring license holders plan to do business independently, they would have to meet their license requirements in their field without assistance from a financial and investment company. To be fully licensed, financial representatives would need to obtain a Series 6 and a NASAA securities license.