What is the Series 6?

The Series 6 license is like a driver’s license…

Just like a driver needs a license to operate a motor vehicle, a person in the financial industry has to have obtained their license to sell certain products. And just like a regular driver’s license doesn’t allow you to drive each and every type of vehicle (you can’t hop behind the wheel of a big rig without a special license), the Series 6 license only applies to selling certain financial products.

Series 6 is an exam and license that the Financial Industry Regulatory Authority (FINRA) offers. The Series 6 license, also known as an Investment Company and Variable Contracts Products registration, allows a securities professional to sell the following investment products: open-end mutual funds, variable annuities, variable life insurance, unit investment trusts, and specific municipal fund securities. The Series 6 is one of several licenses offered by FINRA to participate in different securities activities.

When someone passes the Series 6 exam and obtains their Series 6 license, they’re eligible to sell certain financial products. The Series 6 license allows someone to buy or sell the following products:

• Mutual funds: A mutual fund is an investment fund that invests its assets in a variety of different securities. Closed-end funds are available through an initial public offering (IPO), which is when the fund becomes available for the first time. After the IPO, it’s only available through exchanges, not directly through the fund. Open-end funds are those that can continuously issue new shares. The Series 6 license allows someone to sell closed-end funds in their initial public offering only.
• Variable annuities: An annuity is an insurance product that makes payments at regular intervals. A variable annuity is an insurance contract designed for potential tax-deferred growth, and then you can receive periodic payments. If you die before you receive your payments, your beneficiary may receive them upon your death depending on details of the contract. As a note, you’ll also have to have a state-specific license to sell basic annuities and life insurance. The Series 6 is an additional license to sell variable insurance products.
• Variable life insurance: A variable life insurance policy is a hybrid between a life insurance policy and an investment account. A portion of your premium goes into an investment account, while the other portion is set aside to pay your death benefit, meaning the amount your beneficiary gets when you die.
• Unit investment trusts: A unit investment trust is a type of investment company that issues redeemable securities, meaning the trust will re-purchase an investor’s units at their request.
• Municipal fund securities: A municipal fund security is one of two types of municipal securities. These securities include investments such as 529 college savings plans and ABLE programs to help disabled individuals save money. The other type of municipal security, which the Series 6 license does not allow someone to sell, are municipal bonds that state and local government bodies issue.

To obtain the Series 6 license and sell the products that the Series 6 allows someone to sell, an applicant has to meet a handful of requirements. First, an individual can’t just sign up on their own. An individual must be associated with a Financial Industry Regulatory Authority (FINRA) member firm or self-regulatory organization.

Then, the applicant will have to pass the Series 6 exam. The exam covers the various job responsibilities that Series 6 licensees will have.

The other requirement that Series 6 applicants have to meet is to pass the Securities Industry Essentials (SIE) exam, which covers basic securities information.

The Series 6 exam is the test you’ll have to pass to become registered with the Financial Industry Regulatory Authority (FINRA) to sell the securities products that require the Series 6 license. The purpose of the exam is to evaluate the proficiency of an entry-level employee of a FINRA-member firm. The Series 6 exam consists of 50 questions that you’ll have one hour and 30 minutes to answer.

The Series 6 exam consists of 50 questions that test applicants on the various job functions that go along with the securities products that the Series 6 license allows someone to sell.

Here are some of those functions:

Function 1: Seeks Business for the Broker-Dealer from Customers and Potential Customers

One of the jobs of the Series 6 licensee is to communicate with individuals in person or via phone, mail, email, and promotional material. The Series 6 exam tests applicants on the requirements of these communications and their ability to describe the investment products and services they’ll be selling. The exam includes 12 questions about this job function.

Function 2: Opens Accounts After Obtaining and Evaluating Customers’ Financial Profile and Investment Objectives

In the second section of the Series 6 exam, applicants have to answer questions about their ability to inform customers of the different available investment accounts. They have to be able to acquire customer documents, maintain legal documents, and get information about customers’ investment portfolios. The Series 6 exam includes eight questions about this particular job function.

Function 3: Provides Customers with Information About Investments, Makes Suitable Recommendations, Transfers Assets and Maintains Appropriate Records

This section of the exam tests applicants on their ability to analyze a customer’s investment portfolio and determine additional suitable investments to recommend. They have to know how to educate customers about the risks, rewards, and costs of specific investments. Questions about this particular job function make up half of the Series 6 exam.

Function 4: Obtains and Verifies Customers’ Purchase and Sales Instructions; Processes, Completes, and Confirms Transfers

The final job responsibilities of the Series 6 licensee have to do with their ability to provide up-to-date quotes for customers, to process customer transactions, and to inform supervisors about any transaction issues. The exam contains five questions about this job function.

In 2018, the Financial Industry Regulatory Authority made significant changes to the Series 6 exam. The pass rate since those changes went into place is 58% for those who had already passed the SIE exam.

There are two costs that Series 6 licensees will have to cover to get their license. First, they have to pay to take the Series 6 exam. The exam costs $40. Before they become registered with the Financial Industry Regulatory Authority (FINRA), they’ll also have to pass the Securities Industry Essentials exam, which costs $60.

To maintain a Series 6 license, or any registration with the Financial Industry Regulatory Authority (FINRA), licensees must complete their continuing education requirements. Continuing education is designed to enhance a registered person’s knowledge and professionalism, with emphasis on topics such as sales practices, regulatory priorities, compliance requirements, and ethical standards. On the second anniversary of registration and every three years thereafter, registered persons have 120 days to complete web-based courses administered by FINRA. In addition, at least annually, registered persons must complete an education program administered by their firm.

When you sign up to take the Series 6 exam, you must work for a firm that is a member of the Financial Industry Regulatory Authority (FINRA) or self-regulatory organization. The firm that employs you also sponsors you for the exam. As long as you work for a FINRA-member firm and stay up-to-date with your continuing education, your license will not expire. If you leave your current employer, you’ll have five years to find a job at another FINRA-member firm. If you fail to do that, your license will expire.

The Series 6 license holder can sell products such as mutual funds, variable annuities, and variable life insurance.

The Series 7 exam, in contrast, allows an individual to sell and participate in activities dealing with a wider variety of products. Series 7 licensees can sell products such as:

• Stocks
• Bonds
• Warrants
• Mutual funds
• Money market funds
• Exchange-traded funds
• Real estate investment trusts
• Government securities
• Hedge funds

The Series 63 exam (aka the Uniform Securities State Law Examination) is one that FINRA technically administers, but the exam is put out by the North American Securities Administrator Association. Professionals have to pass the Series 63 exam and hold a license to sell securities in a particular state in the United States. Most states require that individuals pass the Series 63 license in addition to passing the relevant FINRA exam for whatever type of securities they plan to sell. If you take the Series 6 exam to sell the allowed products, you may also have to take the Series 63 exam.