Securing the License: The Basics of Financial Securities Licenses

If you work in the financial services business or have done research on advisors, you will come across different labels for securities licenses. For those looking to understand the license designations or pursue a license, we will explore the common questions you may have when embarking on the journey. Adam Brickner, IBKR Compliance Officer for Special Products and Back Office joins Cassidy Clement to discuss.

Summary – Cents of Security Podcasts Ep. 66

The following is a summary of a live audio recording and may contain errors in spelling or grammar. Although IBKR has edited for clarity no material changes have been made.

Cassidy Clement:

 Welcome back to the Cents of Security Podcast. I’m Cassidy Clement, Senior Manager of SEO and Content here at Interactive Brokers and today I’m your host for the podcast. Our guest is Adam Brickner, IBKR’s Compliance Officer for Special Products and Back Office. If you work in the financial business, or maybe you’ve done research on advisors, you’ll come across different labels and securities licenses. We’re going to discuss the general questions that you may have when you embark on this journey. Welcome to the program, Adam.

Adam Brickner:

Thank you very much for having me.

Cassidy Clement:

 Sure. So, most of our guests that are IB, writers or other parts of the firm, they are repeat guests, but this is your first, this is your first kick at it. So, why don’t you let the audience know a little bit about your industry background?

Adam Brickner:

Sure. So, I started in the business right out of college, in the 80s. I hate to go that far back. I basically came, I started on the trading desk. My first foray was in the world of trading so, I’m an ex-trader. I traded for up until about maybe 15 years ago. I made the switch over to the regulatory side of the business. Compliance was basically in its infancy back then. I mean, you know, firms as big as Goldman Sachs and Morgan Stanley maybe had two or three compliance officers that really handled everything. Obviously, anybody that knows anything about the business, I mean those numbers have, you know, just expanded exponentially. Now, compliance is a big part of anything within the financial industry and, you know, again, I’ve been in compliance probably over 15 years at least, and that was the start of my foray into the business.

Cassidy Clement:

Well, today what we’re going to talk about, I think, is a really common piece for people getting into the financial sector or people who have already been in the financial sector and are looking to maybe expand their career or the exposure of what they work with. But, for the most part, anybody in financial services or banking, et cetera.

You know, they hear about compliance all the time and they hear about these licenses and the numbers and the letters associated. But if we were going to explain this to more of the intro listeners or the beginner listeners, you know, where can somebody actually obtain a securities license? Is that just through FINRA or are there other ways or designations?

Adam Brickner:

Pretty much everything is really through FINRA. The one, I guess, really good thing that’s happened in, I think it was 2018, roughly, was this new thing called the SIE. So, before anybody who wanted to get licensed, needed to be sponsored. Now you can go for this SIE and, you know, obtain that before you’re even sponsored by a firm.

So, you know, I know just from experience from people working, you know, going through college, straight out of college before they’re actually employed, can get this license to start the process going.

Cassidy Clement:

Yeah, the SIE actually came into play after I had already gotten my Series 7, but I think it’s a good reference. So for people listening who aren’t totally sure, it’s a little bit more of a foundational exam., for those entering this space who don’t have a business degree, background or maybe they have less exposure.

It gives you a lot of the business 101, the accounting, general finance, general marketing ideas that are definitely crucial for understanding any additional details that you get into in the support. So, if you’re interested in supporting or specialized licenses, that kind of leads me into the next piece, which is, you were talking a little bit about sponsorship, but outside of that scope, the other major supporting piece is how you study, how you get access to this material.

Of course, the internet has allowed for people to get access to things like never before, it’s information age, but where do people actually get access to this material? I know educational companies exist, but outside of the scope of Googling, how do I study for the Series 7? How do people get access to this material to study in prep?

Adam Brickner:

Yeah, by far, the easiest way is right through your company. You know, places like Interactive Brokers, whatever firm you’re associated with, they usually have a subscription to one of these firms. So they will provide study material. Certain places also have proctors, or classes, or groups, or online, obviously. You know, to your point, a lot of this stuff is done online. But the way this industry is, and the way it’s so dynamic, it is changing all the time, that the easiest way to do it is really to go through one of these companies where you’ll get the latest information, the most up to date rules. Going on the internet, you can absolutely find a lot of this stuff, but you don’t know what’s outdated. You don’t know what rules have changed from the ones you’re finding and seeing. So that is by far the easiest way to do it.

Cassidy Clement:

So once the, uh, I guess you could say you’ve solidified how you’re going to study, the secondary piece is always costs associated because the materials themselves cost money, so does any prep, whether it’s in person or if you maybe purchase a flashcard set online or something like that. But when it comes to the actual process of gaining the license, are there additional costs throughout the process and then I guess is there additional costs after the fact for license retention?

Adam Brickner:

For the most part, first of all, the firm usually absorbs all of those costs. So in other words, a firm like IBKR, for example, they may have a point where if you’re taking a Series 7, they’ll only allow three strikes and you’re out. So they’ll pay for, you know, two of those tests. The third one will be determining the factor where whether you pass or fail, it’s on you. Some firms will make you pay for it but it is definitely not a cheap process. The study material itself is expensive. Taking each test itself is expensive. And usually once you do pass, there are, you know, online follow up classes. I believe it’s every year now, maybe every other year. I know it used to be three years and it keeps getting shorter. And obviously, you know, they want you to stay refreshed with your knowledge.

But so, once you obtain your license, there really isn’t any cost afterwards, but the cost of obtaining your license can be significant depending upon how much information you need. If you’re a finance student like I was, you know, hopefully a lot of this stuff is ingrained into you and you have familiarity with a lot of it.

There are plenty of people, as you were saying, that come from different industries and want to get or become interested in finance, want to get into that, and they don’t really have that background, they don’t have that knowledge. They may need these proctors or, again, these online things where, again, it just keeps adding to the cost, but they definitely are not cheap. And usually, depending upon the firm, the firm will absorb those costs. That’s always been my experience.

Cassidy Clement:

Yeah, I mean in my research as I was going through, I mean it’s been maybe six or seven years at this point since I’ve taken an exam, for the licenses, but the membership fees, registration fees, sometimes fingerprinting, if you haven’t already done that, any qualification exams, and then there’s renewal fees.

There’s so many additional compounding costs that, you know, if you’re going to try to get into that area and retain a license, there’s definitely things that you need to keep tabs on to make sure that you’re not incurring extra unnecessary costs. But the most important thing, I think is making sure that if you are going to go down a certain road for one of these licenses, understanding that some of them are for certain roles or maybe for certain topics, they’re not all as broad as we’ll say like the SIE is or maybe Series 7. So would you be able to explain to the listeners some of the common licenses and what they’re aligned with or who they’re aligned with or the general idea they’re aligned for?

Adam Brickner:

I guess the best way to kind of look at it is like a triangle. You know, as you said, you start at the base. It’s much broader as you start going through everything. It gets more specific once you start getting into the advanced testing. It is absolutely, you know, specific to whatever area you’re covering.

So usually you start off with the SIE, you know, you’ll go up to something like a Series 55 or a Series 7 if you’re a trader. If you’re just going to be, and you know you’re only going to be in compliance, you’ll go over to, areas like a Series 14, which is just a compliance officer exam.

 A Series 7 may be required in your role. It all depends on what you’re doing. If you’re talking to customers, if you’re overseeing traders who are, you know, taking on trading positions, it all depends on what you’re overseeing. But then once you get these general registrations then you become specialized.

So then if you go to, say, a Series 24, which then you become a principal, that’s kind of the goal that a lot of companies like to see. There’s a lot of, you know, activity that you do as a compliance individual that requires a Series 24, meaning that you have an extended, oversee level and for a regulatory perspective, that’s what they want to see. You know, they’re applicable to certain roles. And obviously if you want to get ahead and you want to further your career, that’s something you want. And then depending upon what area is interesting, you could go to something like a series 54, which is an options principal exam.

Series 52 goes into municipal trading. You know, so depending upon what you want to do, what areas interest you, then you could look at, and decide on, you know, what registrations you want to take.

Cassidy Clement:

Something else that I didn’t mention is that the time limit, the questions, the passing grade, and the cost all varies in addition to what each of these exams is for. So that’s another piece that listeners who are looking to get into the area should really think about when they’re starting to map out their journey. A lot of these places will give you generalized study calendars, if you will, that give you an idea of if you need to learn the material in six weeks or six months, etc. It’ll give you a general roadmap, but you really have to understand what the goal is in terms of what beast you’re going to slay here.

If it’s going to be a 50 question test and you need a 70 percent to pass, you have a little bit of a barometer of how well or how quickly you yourself can retain the information and you can apply that to what you need to pass. But part of the, I think, big daunting piece is when you start to get into things like the Series 7, which is now the SIE, and then into the 7. Sometimes people don’t always understand the time commitment, the material commitment, meaning retention of that material, and then also the cost, which we touched on a little bit. But from the perspective of just a generalization of any of these exams, what are some things that people should keep in mind when pursuing these licenses?

Adam Brickner:

I think by far you’re absolutely right. You know, I guess the dedication that you need as a person is paramount. That’s number one for any of these tests. Everybody is different . I, you know, again, took this right out of college, again, went to finance. So a lot of this stuff was fresh in my mind.

When I took the Series 7 straight out of college, I took it within months of my graduation. I didn’t put in that much time for, you know, people, said, no way would I pass it and I did. Not because I’m, you know, a brainiac or anything like that, but because I had that knowledge already.

A lot of that stuff I had gone through, through my education. When I took my, Series 4, which was, I don’t know, probably about 10 years ago or so, I started going through the manual, going through the book. I read the first chapter, and I’ll be blatantly honest with you, after I was done, I retained nothing. It was so involved and so in depth that it was hard to retain the information. So the best thing for me was the way I, you know, learned the stuff was simply by doing the practice test. I went over the practice test over and over. For me and for the way I learned, that’s just what enabled me, you know, best to kind of learn the information.

So I think part of it is definitely about, you know, knowing the individual. Everybody is different. But without a question, it’s dedication. This isn’t something you study for an hour or two and you go and take the test. This is something you study for weeks, if not months. And you know, you get as prepared as you want because the last thing you want to do is have to go through it and take it again. It’s worth all the time and the effort you can to learn everything, to take the practice test, to go through it, and if you’re borderline, you’re not ready. You need to really, really, be passing these tests as you go through, and be confident that when you’re sitting there on that computer, taking the real exam, that you’re going to pass that first time. Because, you know, regardless of how much time and effort you have to put in, it’s worth it.

Taking the test the second time, it’s just, it’s so much added time and effort on your part. So, I think that all comes into play, but yeah, these are not easy tests, any of them, and they just keep getting harder. They keep getting longer, they keep expanding the scope of these tests, and they keep expanding on the information that’s, you know, contained within these exams.

Cassidy Clement:

I think the value of going into these exams after being in a college setting or even if you’re somebody who just took a course for a different certification or you just took a class at a local college to learn about some specialization, having your attention and your work style already be in that focused state is very valuable because as you said there is a lot of information and a lot of complexities in these types of study materials. In all honesty a lot of it is written because they are not sure if the people reading already have the background or not and that’s kind of how the SIE came to be.

If you come in with a business acumen already, there is a lot of brush that you can clear out that you maybe already understand. Whether it’s, okay, I know what a balance sheet is, or I already understand the difference between a call and put option. There’s a lot that you can then dive right into the focused and specific material. But if you are just kind of getting back into the swing of things, there’s so much to absorb and sometimes it’s very hard to pick and choose what’s worth it and what’s not to spend your time because you may end up reading a chapter that you are fully understanding of and you don’t realize that until you hit the end. That can happen for sure, but I will say also those practice exams and a lot of the supporting material, it’s incredibly helpful and it really gets you ready to be in that testing environment. I remember getting up, going to mine at six in the morning. There was no sunlight. It was in a place with no windows. You walk in, you show them your ID and you lock your stuff up in a locker and you are in there for hours with nothing but a whiteboard and a computer. And you have to trust yourself that you can get through a lot of this information by digging really deep and sometimes the questions are there to kind of trip you up and that’s just speaking for the basic licensures.

Not even the higher, more in depth ones can sometimes be a four hour long test. Who knows? That’s a lot of material. Are there certain, tests or any certifications that you went through? Do you have an anecdote or something like that for our listeners that made you go, oh, okay, I am so glad that I finished this and I don’t have to take it again and that I dedicated my time the right way the first time?

Adam Brickner:

The Series 4, again, the options principle, that was definitely one of them. But just to touch on a couple of points that you said, because I think that they are kind of important. The one other big help that the test, you know, provide is that when you go through them, they kind of also tell you what areas are your strengths and what areas are your weaknesses.

So when you go through those practice tests, you’ll be able to kind of pinpoint and get a better idea of what areas you really need to, you know, focus on and what areas, again, are your weaknesses that maybe you need to put extra time in studying or maybe go back and read chapters again or take additional tests in those areas.

The anecdotes, yeah. So when you do go into that test, it’s exactly as you stated. You go in there, you’re assigned a locker, you put every single piece of your belongings in there. You go in with empty pockets. For the options exam, the one thing that is and made it difficult for me, I was, you know, a finance major, so math was always my strong point. But for options, they hand you a calculator and you go in there and for me, that was the big issue. You have to do calculations related to, you know, options expirations and all of this stuff and, you know, that you either know or you don’t, you know? And also, to your point, you will see questions that say, which is the best answer? And the reality is, sometimes two of those answers are right, but they’re looking for that one that is more correct. And there are sometimes where they’ll say, you know, whatever, choice A, choice B, both choice A and B, either. You know, so it isn’t as easy as just, yeah, you know, just A, B, C, or D and, one of those answers is going to be right.

It’s never that straightforward. The test is hard enough as it is just to learn the material. But yeah, FINRA always has this extra twist where, you know, they make sure you absolutely know this backwards and forwards, completely.

Cassidy Clement:

Yeah, the calculations especially. There’s nothing fancy usually about those calculators. They’re usually the most basic ones. So you have to know the formulas inside and out. And, I could speak for a lot of people when I say, when I was studying for that, I basically was being eating, breathing, and sleeping, Series 7 for 6 months because you had to know it inside and out. But you brought up some awesome points and really good tips for our listeners.

Adam Brickner:

And my pleasure, truthfully, my pleasure. You know, reminiscing about the course. I’m very happy I do have a lot of these licenses. I’m happy that, you know, I have a lot of the, I guess more important ones where I don’t have to go back and do that. But yeah, it was not a pleasurable experience going through it all, but in the end, well, well worth it. And these are all things that future employees look for. They absolutely love it. Absolutely do. You know, things like a Series 24, where a principal, where they know that you could be in a more senior management role. A Series 4 for options, if that’s your thing, where again, you could be in a senior role, you know, overlooking an options desk, or, you know, something to do with options. But depending upon what you want, yeah, they are definitely not easy to come by, but well worth it once you succeed.

Cassidy Clement:

Yeah, for sure. Definitely, tough getting up to it, but worth the journey. Always can be helpful in career development and also finding out if you like another portion of the business. So thank you for joining us today.

Adam Brickner:

Thank you very much for having me.

Cassidy Clement:

Sure. So as always, listeners can learn more about an array of financial topics for free at Interactive Brokers and IBKRCampus.com. Follow us on your favorite podcast network and feel free to leave us a review. Thanks for listening, everyone.

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