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Professional Qualifications

Professional Qualifications. Bri Joiner – Manager, Professional Qualifications Association of Registration Management Conference. Discussion Topics Outline. Overview of Municipal Securities Dealer Qualification Standards Overview of Municipal Advisor Professional Qualification Standards

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Professional Qualifications

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  1. Professional Qualifications Bri Joiner – Manager, Professional Qualifications Association of Registration Management Conference

  2. Discussion Topics Outline • Overview of Municipal Securities Dealer Qualification Standards • Overview of Municipal Advisor Professional Qualification Standards • Overview of Continuing Education Program (CE) Requirements for Municipal Securities Dealers and Municipal Advisors

  3. Municipal Securities Dealer Professional Qualification

  4. Municipal Securities Dealer Qualification Requirements • Associated persons of brokers, dealers and municipal securities dealers (“dealers”) must qualify by exam to perform certain functions • The MSRB classifies associated persons of municipal securities dealers into categories based on their function: • Municipal securities representative (Series 52) • Municipal securities sales limited representative (Series7) • Limited representative (Series 6) • Municipal securities principal (Series 53) • Municipal securities sales principal (Series 9/10) • Municipal Fund Securities Limited Principal (Series 51)

  5. Municipal Securities Dealer Qualification Requirements (continued) • Each class of associated persons can take on certain functional roles at the firm: • Municipal securities representative (Series 52) • Can engage in sales, trading and underwriting municipal securities • Municipal securities sales limited representative (Series 7) • Can only engage in sales to and purchases from customers of municipal securities • Limited representative (investment company/variable contracts) (Series 6) • Can only engage in sales to and purchases from customers of municipal fund securities (i.e., 529 plans and LGIPs)

  6. Municipal Securities Dealer Qualification Requirements (continued) • Dealers should understand the differences between the principal designations in order to supervise the activities engaged in by associated persons: • Municipal securities principal (Series 53) • Can supervise all activities that pertain to effecting transactions in municipal securities • Municipal securities sales principal (Series 9/10) • Can supervise activities that are limited to sales to and purchases from customers of municipal securities (oversee sales activities conducted by the S.7) • Municipal fund securities limited principal (Series 51) • Can supervise activities that are limited to sales to and purchases from customers of municipal fund securities (oversee sales activities conducted by the S.6)

  7. Frequently Asked Questions • Can an individual holding the Series 51 qualification act in the capacity of a Series 53, while the person holding the Series 53 is away on vacation?

  8. Answer • Reminder: The Series 51 is a limited principal qualification, so an individual holding the Series 51 would not be able to supervise the broader activities of a dealer. • Another individual holding the Series 53 would need supervise firm activity.

  9. Frequently Asked Questions • Is the Series 7 qualification a pre-requisite to the Series 53 qualification?

  10. Answer • Reminder: Individuals who passed the Series 7 examination prior to November 7, 2011 are qualified as municipal securities representatives • However, if the registration should lapse, an individual would then have to pass the Series 52 to re-qualify as a Municipal Securities Representative • The Series 52 or Series 7 (if taken and passed prior to November 7, 2011) is a pre-requisite for the municipal securities principal designation

  11. Frequently Asked Questions • Did the MSRB adopt similar provisions to harmonize with FINRA’s registration and professional qualification rule amendments?

  12. Answer • Reminder: Yes. The MSRB amended Rule G-3 to: • accept the SIE as a pre-requisite to the Series 52 • allow for permissive registrations (such persons would be subject to applicable MSRB rules); and • adopt the provisions related to the financial services industry affiliate waiver program (FSA-WP).

  13. Frequently Asked Questions • How many municipal securities principals is a dealer firm required to have?

  14. Answer • Reminder: Dealers must have at least two municipal securities principals, unless: • the firm is a member of FINRA and also engages in general securities business; or • has fewer than eleven persons at the dealer engaging in municipal securities activities • In these instances, the firm is allowed to have one municipal securities principal

  15. Municipal Advisor Professional Qualifications

  16. Municipal Advisor Representative Qualification Examination (Series 50)

  17. Municipal Advisor Professional Qualification Framework • The Dodd Frank Act charged the MSRB with setting professional qualification standards for municipal advisors • Persons associated with dealers and municipal advisors must pass examinations as the MSRB may establish • MSRB Rule G-2 was amended to require firms to comply with requirements outlined under MSRB Rule G-3 • MSRB Rule G-3 sets forth the professional qualification requirements

  18. Standards of Professional Qualification for Municipal Advisors (continued) • Associated persons of a municipal advisor that are: • Municipal Advisor Representatives – any individual who engages in municipal advisory activities on behalf of the municipal advisor or • Municipal Advisor Principals – any individual who is qualified as a municipal advisor representative and is directly engaged in the management, direction or supervision of the municipal advisory activities of the municipal advisor and that of its associated persons • Must pass the Municipal Advisor Representative Qualification Examination (Series 50 exam)

  19. Standards of Professional Qualification for Municipal Advisors (continued) • Municipal advisor professionals had a one-year grace period to take and pass the Series 50 Qualification Examination • Grace-period expired on September 12, 2017 • Now, only an associated person of a municipal advisor who is qualified by passing the Series 50 qualification examination can: • Engage in municipal advisory activities, or • Be engaged in the management, direction or supervision of the firm’s municipal advisory activities and that of its associated persons

  20. Municipal Advisor Principal Qualification Examination (Series 54)

  21. Municipal Advisor Principal Qualifications • One December 20th, the SEC approved amendments to MSRB Rule G-3 to require municipal advisor principals to become appropriately qualified by passing the Series 50 and Series 54 qualification examinations

  22. About the Pilot Series 54 Qualification Examination • Registration for the pilot Series 54 qualification examination is open from March 4-15, 2019 • The enrollment period for the pilot examination is only two weeks and candidates will have 120-calendar days from their exam enrollment to sit for the exam • No later than July 31, 2019 • The examination is designed to test a candidate’s specified-level of competence with respect to supervisory application of rules and regulations

  23. About the Pilot Series 54 Qualification Examination (continued) • The pilot Series 54 qualification examination will consist of 110 multiple choice questions • 100 multiple choice questions will be scored and 10 will be unscored pre-test questions • Each candidate will receive a unique examination • Each candidate’s exam will cover the same content and have the same overall difficulty • Three hours will be allotted for completing the pilot Series 54 qualification examination

  24. About the Pilot Series 54 Qualification Examination (continued) • Timeline for Pilot Results • Approximately three months after the close of the pilot, candidates will receive an email from the MSRB of their examination results • What does passing the pilot mean • Candidates who pass the pilot Series 54 qualification examination will be considered appropriately qualified once the permanent Series 54 becomes available

  25. Enrolling for the Series 54 Examination • Who should use FINRA’s Test Enrollment Services System (TESS)? • All municipal advisor firms, even FINRA broker-dealer municipal advisors, must use TESS to enroll individuals to take the pilot Series 54 examination • To clarify, firms or candidates may open an exam enrollment window using TESS

  26. Frequently Asked Questions • Who must qualify as a municipal advisor principal?

  27. Answer • Reminder: Any person who is engaged in the management, direction or supervision of the firm and that of its associated persons. • The determination is based on functional role and not title held by an individual

  28. Frequently Asked Questions • Does the chief compliance officer have to be qualified with the Series 54 examination?

  29. Answer • Reminder: It depends … : • Under MSRB Rule G-44, the CCO may be a principal of the firm or a non-employee of the firm, SO • If the individual is a principal, then the person would need to be qualified with the Series 54 • If the individual is a non-employee, as long as the individual is not engaged in the management, direction or supervision of the firm, then the individual isn’t required to have the Series 54

  30. Continuing Education Requirements

  31. Continuing Education Requirements for Dealers • Who has to take CE at a dealer firm? • Covered registered person – those that are defined as registered person who regularly engage in municipal securities activities • What are the CE program requirements? • MSRB Rule G-3 requires a two-part continuing education requirement for covered registered persons • Regulatory Element; and • Firm Element

  32. Continuing Education Requirements for Municipal Advisors • Who has to take CE? • Covered persons – those that are defined as individuals qualified as a municipal advisor representative or municipal advisor principal • What are the CE program requirements • A single-prong approach to CE that’s similar to Firm Element: • Municipal advisors to annually complete a needs analysis that evaluates and prioritizes the municipal advisor’s applicable training needs; • Develop a written training plan based on the needs analysis; and • Deliver training consistent with the needs analysis and written training plan

  33. Enforcement Case Fine: An AWC was issued in which a firm was fined $10,000. • Qualifications Violative Conduct: The firm improperly delegated responsibility for reviewing and approving municipal securities transactions to two principals who did not hold the Series 53. • Supervisory Controls Violative Conduct: The firm failed to establish supervisory procedures for the proper supervision of the firm’s municipal securities activities.

  34. Resources • MSRB Rule G-2: Standards of Professional Qualifications • MSRB Rule G-3: Professional Qualification Requirements • Understanding the Municipal Advisor Principal Qualification Examination (Series 54) • FAQs on Municipal Advisor Professional Qualification and Examination Requirements • FAQs on Continuing Education Program Requirements for Municipal Advisors

  35. Professional Qualifications Bri Joiner – Manager, Professional Qualifications Association of Registration Management Conference

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