The Series 79 exam is a lighter version of the Series 7 exam, but don't be fooled, the exam is deceptively difficult.
Tutorial: Advanced Financial Statement Analysis
The Series 79 exam is for those looking to work in the area of investment banking. Before 2009 the more popular exam (the Series 7) was required to be a general broker, but some representatives found they were only performing investment banking activities, which is only a small portion of the Series 7 exam. Retail securities firms provide a different set of functions and services than investment bankers, so the Series 7 testing material covered topics beyond the duties of most investment bankers. Because of these concerns, a job analysis was conducted and a committee of investment bankers agreed on the major duties, job functions and tasks associated with this investment banking. In 2009 the Securities and Exchange Commission (SEC) approved the more focused, Investment Banking Representative Qualification Examination (Series 79). This exam is also referred to as the "Limited Representative" Investment Bankers's exam because it was designed for entry level investment bankers.
Who Needs the Series 79
What is investment banking and how do you know you need the Series 79 license? Besides being told by your employer, there are specific areas of finance where you will probably need this license. NASD Rule 1032 defines the different types of representative categories, and section (i) Limited Representative - Investment Banking gives a more than thorough explanation of the areas.
The series 79 satisfies the Series 24 prerequisite as a representative exam. But because the Series 79 focuses on investment banking, the Series 24 General Securities Principal will be limited to investment banking supervisory responsibilities if they only have the Series 79. The Series 7 is more general and is not a substitute for the Series 79. So those looking to move into supervising investment bankers will need the Series 79 even if they already have the Series 7. This is one of the only cases where the Series 79 can be used as a prerequisite instead of the Series 7. (Knowing how the primary and secondary markets work is key to understanding how stocks trade, read A Look At Primary And Secondary Markets.)
Generally if you deal in either of these two main areas of activities, either as a worker or a supervisor, you might need the Series 79.
1. Debt or equity offerings through public or private placement.
Other activities involved which the series 79 might be required for:
- Pricing of securities in the debt and equity offerings
- Origination, which deals with equity capital markets and debt capital markets
- Managing the allocation and stabilization activities of offerings
2. Mergers, acquisitions and financial restructuring
Some responsibilities that a series 79 will train on or might be required for.
- Tender offers
- Selling asset
- Corporate reorganization or divestitures
- Transactions involving business combinations, which might include rendering opinions solvency and fairness opinions
There Are Exceptions
Even if the employee participates in these investment banking activities they might not need a Series 79 if the exposure is very limited. Also in some jobs where new associated employees rotate among different business areas and departments for training purposes, there is some leeway. These workers will be given a six month grace period from when they start working in investment banking activities. Normally, working in these areas would trigger the need to register as an Investment Banking Representative, but this exception allows firms to train employees. For a complete guide to exemptions look at NASD Rule 1032 (i).
The Series 79 Exam
The exam is made up of 175 multiple choice questions consisting of four potential answers, but there are 10 additional questions which are added that don't count toward your score. This brings the total questions taken to 185. The 10 additional questions are potential exam questions, and examined by a committee to determine the difficulty. Candidates are given five hours to complete the exam which gives them 1 minute and 37 seconds per question. This is done on computer so the results are given right after the exam as a pass or fail, as well as a breakdown of the performance in each section.
1. Collection, analysis and evaluation of data (43%)
This section is the largest with 75 questions and includes finding the relevant data, and understanding where you will need to look to get it. For example, knowing what will be in proxy statements Form 14A or Form 4s for beneficial ownership of directors. This section also goes into communicating with different departments and clients. Using metrics and ratios, and trends to evaluate what you have found in the firm and sector data. Finally, this section wraps up with understanding due diligence activities, such as knowing the buy and sell side due diligence and regulatory requirements. (Certain transactions reveal much about a stock. We go over what to consider and where to find it, read Keeping An Eye On The Activities Of Insiders And Institutions.)
2.Underwriting/new financing transactions, types of offerings and registration of securities (25%)
This section has 43 questions and deals with regulations of filing and registering securities. This includes forms (such as the prospectus), rules and required financial statements. This section also covers the distribution of marketing materials and many associated rules.
3.Mergers and acquisitions, tender offers and financial restructuring transactions (19%)
This section has 34 questions and goes into the buy side and sell side transactions, the fairness opinion and of course the SEC rules and regulation. This section also goes into tender offer regulations and financial restructuring. (Learn more in Buy Side Vs. Sell Side Analysts.)
4. General securities industry regulations (13%)
This section has 23 questions and goes into proper business conduct including registration of individuals, continuing education, and handling customer complaints.
Requirements and Passing
Candidates must be sponsored by a FINRA member before they can even take the exam. Requirements for eligibility include taking the appropriate qualification examination. This is outlined in NASD rule 1032 (i).
Candidates need to answer a certain number of questions correctly to pass but the actual number is not known. Also, the pass score can change from one year to the next. Some think the pass rate is around 73%, which is about 128 correct answers, but this doesn't include the 10 additional questions thrown in, and is only an estimate.
Investment Banking Representative Qualification Examination
Before 2009, whether working as a representative with retail clients or just doing investment banking activities you would need the Series 7. Now, if you have decided to focus on investment banking as a career you can take the Series 79 to become a limited representative. Later, if you want to move into a retail securities firm you can take the Series 7. But don't take this test lightly; it is more focused but extremely challenging.
InvestingMany global Investment banks are highly involved in the energy industry, but there are also some smaller banks and boutiques that are strong players.
MarketsExamine the Flatiron School as it pertains to the product it offers; learn how it monetizes its product and the role the school plays as an industry disruptor.
ProfessionalsRead an in-depth review and comparison of a career in investment banking and a career in corporate finance, with advice about which one to choose.
InvestingWe take a close look at investment banks working with middle market companies.
Fundamental AnalysisThe costly services of investment banks don’t necessarily guarantee accuracy in IPO pricing.
InvestingThe real estate market relies on capital provided by large global investment banks.
Personal FinanceThe best business school for you depends on your skills, career goals and interests. We help future MBA's make a more informed choice.
ProfessionalsReview an in-depth comparison between investment banking and investment management, their respective career paths and which one you should choose.
ProfessionalsTake a comparative look at two of the most popular career choices in the financial sector, wealth management and investment banking.
ProfessionalsRead an in-depth comparison about working as a Financial Analyst vs. working as an Investment Banker, two highly prestigious business careers.
Financial advisors are not required to have university degrees. However, they are required to pass certain exams administered ... Read Full Answer >>
If you are older than 59.5 and have been contributing to your IRA for more than five years, you may withdraw funds to pay ... Read Full Answer >>
If you are over 59.5, or separate from your plan-sponsoring employer after age 55, you are free to use your 401(k) to pay ... Read Full Answer >>
Investment banking and commercial banking are two primary segments of the banking industry. Investment banks facilitate the ... Read Full Answer >>
The Chartered Financial Analyst, or CFA, program is a professional certification awarded by the CFA Institute. CFA candidates ... Read Full Answer >>
In today's financial services marketplace, a financial institution exists to provide a wide variety of deposit, lending and ... Read Full Answer >>