At the intersection of securities and insurance regulation is variable lines broker regulation. These dually licensed professionals bear the brunt of complying with multiple regulatory entities just to get started – no easy task.
To appreciate their pain, let’s take a look at how someone can qualify to sell variable lines products, and what licenses they have to maintain in order to keep their ready-to-sell status. (Keep in mind this isn’t advice – you need to comply with the regulations and standards in your jurisdiction and area of the industry. Got it? Great.)
To start, we’ll examine the securities side of the house. The securities side of the house for a variable lines broker is regulated by the Financial Industry Regulatory Authority, or FINRA, which operates under the dictates and direction of the Securities and Exchange Commission (SEC).
The first thing you’ll need to do if you’re just starting is take the Securities Industry Essentials exam.
What is the Securities Industry Essentials exam?
The Securities Industry Essentials exam, or SIE, is the basic exam any variable lines producer – or, really, anyone looking to handle investments at all – will need to pass in order to get a foot in the door.
The SIE is a standard test administered by FINRA, and it’s a precursor to all the other possible exams you can take through FINRA. The test itself takes one hour and 45 minutes and is 75 questions long. As the name suggests, these 75 questions cover the fundamentals of the securities industry.
By answering basic questions demonstrating your knowledge of the compound interest formula and the laws of supply and demand on the SIE, you can earn yourself the right to then go answer specific questions about hedge fund regulation in exams like the Series 7 or any other “top-off” exam.
While you have to pay to take the SIE, this test has the lowest barrier to entry of all the FINRA exams because you don’t have to be “sponsored” by an investment firm of any kind.
What is a corporate sponsor for FINRA investment exams?
Most FINRA Series exams, or really anything beyond the SIE, require a “corporate sponsorship,” which in this case means an existing FINRA member firm reports to FINRA that you’re with them. Often, the sponsoring firm will also pay for your exam. This allows FINRA to ensure that anyone taking non-SIE tests has a reason and buy-in to do so.
What if I never took the SIE but I passed a different Series exam?
Prior to 2018, the SIE didn’t exist, and many of these repetitive basic Econ 101 securities questions were built into exams such as the Series 6, Series 7, etc. So, if you already have a Series exam under your belt that you took back in the day, then no worries, you’re considered to have already cleared the hurdle of the SIE. Now, the exams that used to present an all-or-nothing proposition are considered “top-off”exams, the corporate-sponsored final stop for anyone who has already cleared the SIE.
What are the FINRA top-off exams?
Since 2018, FINRA has made the SIE a prerequisite to take “top-off” exams, which are Series exams that top off your ability to become a registered representative of a FINRA firm. Like a French beach, the FINRA top-off exams aren’t for everyone. That’s why they generally require a corporate sponsor.
The exams that FINRA opens after you’ve passed the SIE include:
- Series 6
- Series 7
- Series 22
- Series 57 (the Series Formerly Known as 55/56)
- Series 79
- Series 82
- Series 86/87
- Series 99
There are some other state-specific-but-FINRA-administered exams that aren’t reflected here because they’re not top-off exams. These coy tests are instead reflective of state practices, so, in theory, you don’t need to first take the SIE before diving in.
To sell variable lines insurance products like variable annuities, RILAs, or variable life insurance, however, you’ll need to take either the Series 7 or the Series 6 as a top-off exam.
Can I sell variable lines with a Series 7?
You sure can. A Series 7 top-off exam from FINRA will enable you to discuss and sell the vast majority of group and individual securities, from variable annuities to real estate investment trusts (REITs). The Series 7 is often the go-to exam for anyone hoping to make a career in financial services because it gives you the most versatility of any of the exams.
A Series 7 exam necessitates that you have a sponsoring firm or business that’s already a FINRA-registered member. As we said earlier, having this sponsorship means your sponsor will likely pay for your exam, as well. While this is somewhat the “preferred” exam for someone in the securities industry, it’s also a high-stakes game: This is one of the more difficult exams because of the wide range of products the exam covers, and if your employment with your sponsoring firm is contingent on exam passage… Whooooo boy.
Another thing to remember: In most states and jurisdictions, a Series 7 isn’t enough; you’ll also have to take the Series 63 exam.
Can I sell variable lines products by passing a Series 6 exam?
Instead of taking the wider-ranging Series 7 exam, prospective brokers can take a Series 6 exam, which covers only fund-based group securities such as mutual funds and variable insurance products. From the standpoint of FINRA and federal securities interests, the Series 6 exam allows you to sell variable lines products, yet individual states require that you take a Series 63 exam in addition to the Series 6 before you can sell variable annuities in that state.
The Series 63 is another exam that’s administered by FINRA, but it isn’t part of the top-off exam structure. While FINRA manages the moving bits of who’s taken the exam and when, the questions and structure are actually managed by the North American Securities Administrators Association (NASAA, not the space one). So, you don’t have to take the SIE before taking your Series 63, but your Series 63 has to be paired with the Series 6 or Series 7 exam (which do, in fact, require you to take the SIE, see how fun that is?).
The Series 63 covers “blue sky” laws, which essentially means state variations of the Uniform Securities Act. While the Series 63 doesn’t specifically assess a candidate’s knowledge of state-specific laws, questions generally cover the USA, ethics, and state-level administrative proceedings.
According to Investopedia, Colorado, District of Columbia, Florida, Louisiana, Maryland, Ohio, and Puerto Rico don’t require brokers to get a Series 63 as long as they have their Series 6 or Series 7.
Is it better to take a Series 6 exam or Series 7 exam to sell variable insurance products?
The Series 7 is a more rigorous exam and is more likely to serve you best if you’re planning for a nice long-term career in the financial services industry that extends beyond variable insurance or mutual funds. If, however, you’re OK limiting your financial sales activities, the Series 6 may be a perfectly reasonable path. In other words, there’s not a best option so much as there is an option that might be best for you.
Can I sell variable products with a Series 65 or Series 66?
The short answer: Nope. The longer answer: No, since a Series 65 and Series 66 give you the ability to advise on assets in a fiduciary capacity, they don’t allow you to actively sell those products for commission. That’d be a conflict of interest.
Now, with the rise of dually licensed brokers and advisors in the wake of the Department of Labor “Fiduciary Rule” kerfuffle, it’s not uncommon for a professional to obtain a Series 65 in addition to a Series 7 or Series 6. In this case, it becomes extra, extra important that a broker is being clear and direct about what capacity they serve in regard to a carrier’s product and their clients.
What life insurance license lets me sell variable lines?
Typically you need a life insurance license with a variable line of business attached. Surprise surprise, the way this works in practice varies by state. Most states handle this as a subset of a life insurance license, but to give you an idea of variation, let’s look at resident requirements as we skip through states in the middle of the country:
- Michigan requires variable lines brokers to pass a specific variable lines exam to get a variable line of authority, but the line of authority is ultimately the same.
- Kansas asks variable lines questions as part of its life insurance exam, and you must hold a life insurance line of authority to be a variable lines broker, but, once you’ve gotten the requisite Series exam under your belt, you can apply to have a separate variable line of authority in the state (although it doesn’t require a separate insurance test)
- Texas lets you sell variable lines if you have a life insurance license and submit your Central Registration Depository (CRD) number and other FINRA data to the state to obtain the appropriate variable insurance carrier appointment.
So, in one state, variable life and life are the same license, but with a separate insurance exam. In another, it’s a separate license, but the same exam. And in another, it’s the same license and the same exam.
Which should I get first if I want to sell variable lines, a Series exam or a life license?
Start by getting your SIE and requisite Series exams knocked out. While there are a few additional factors and exceptional situations, if your focus is on variable lines sales, in most states you’ll want to start with the Series licenses because the state insurance department won’t let you get a variable lines license or appointment without having a CRD number, while you can get a CRD and your securities exams without having a corresponding insurance national producer number (NPN).
How is anyone supposed to keep track of all this?
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