Passing the Series 79 exam is required for applicants for entry-level jobs as investment banking representatives. This test, in addition to the Securities Industry Essentials (SIE) exam, is a necessary step to obtaining registration for the job.
Both tests are administered by the Financial Industry Regulatory Authority (FINRA).
The Series 79 is considered a lighter version of the Series 7 exam, but don't be fooled: It's deceptively difficult.
Focus on Investment Banking
Before 2009, the better-known exam, the Series 7, was required. Investment banking is only a small portion of the Series 7 exam. Most of the test is more relevant to the functions and services of retail securities firms.
After a job analysis was conducted, a committee of investment bankers agreed on the major duties, job functions, and tasks associated with those working in investment banking.
- Passing the Series 79 test is a required step for qualifying as an investment banking representative.
- Candidates must be sponsored by a FINRA member to take the exam.
- It's a multiple-choice test with 75 questions. A passing grade is 73% and above.
In 2009, the Securities and Exchange Commission (SEC) approved the new Series 79 exam, known as the Investment Banking Representative Qualification Examination. This exam is also referred to as the Limited Representative Investment Bankers exam because it was designed for entry-level investment bankers.
There are specific areas of finance for which one will likely need the Series 79 license. FINRA Rule 1220(b)(5) defines the different types of representative categories, and section (i) Limited Representative-Investment Banking gives a thorough explanation of the areas.
The Basics of The Series 79 Exam
Series 79 Exam Prerequisites
The Series 79 exam satisfies the Series 24 prerequisite as a representative exam. However, because the Series 79 focuses on investment banking, the Series 24 General Securities Principal will be limited to investment banking supervisory responsibilities if the candidate only has the Series 79.
Generally, testers will need Series 79 registration 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.
Generally, a candidate might need the Series 79 to work in the areas of Debt, Equity, or Mergers and Acquisitions.
Debt or Equity Offerings
Debt or equity activities that might require a series 79 include:
- Pricing of securities in debt and equity offerings
- Origination, which deals with equity capital markets and debt capital markets
- Managing the allocation and stabilization activities of offerings
Mergers and Acquisitions and Restructuring
Some responsibilities that a Series 79 might be required for under this category can include:
Series 79 Exceptions
Series 79 registration may not be required for limited involvement in investment banking activities. In some jobs in which new associates rotate among various business areas and departments for training purposes, there is some leeway.
Generally, these workers will be given a six-month grace period while they are training.
For a complete guide to exemptions, look at NASD Rule 1032 (i).
The Actual Exam
The exam is made up of 75 multiple choice questions and is completed on a personal computer. Candidates are given 150 minutes to complete the exam. The results are available immediately after the exam as a pass or fail grade, with a breakdown of the candidate's performance in each section.
Candidates need to answer 73% of the questions correctly for a passing score.
A tutorial on the exam is provided prior to taking it. Each candidate’s exam includes 10 additional questions that do not contribute toward the candidate's score.
The Series 79 is an essential prerequisite for working in debt, equity, and mergers and acquisitions.
Candidates must be sponsored by a FINRA member to take the exam. Requirements for eligibility include taking the appropriate qualification examination.
Candidates must pass both the Series 79 and SIE exams, although they don't have to be taken at the same time.
There are three sections to the test. The 10 additional questions are scattered throughout at random.
Collection, analysis, and evaluation of data (49%): This is the largest section, with 37 questions, and it includes identifying the relevant data and knowing where to find it. For example, you might need to know what will be in proxy statements Form 14A or Form 4s for beneficial ownership of directors.
This section also goes into communicating with various departments and clients, using metrics and ratios, and analyzing trends to evaluate what you have found in the firm and sector data.
Finally, this section tests your understanding of due diligence activities, such as the regulatory requirement for the buy and sell sides.
Underwriting/new financing transactions, types of offerings, and registration of securities (27%): This section has 20 questions dealing with regulations for 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 any associated rules.
Mergers and acquisitions, tender offers and financial restructuring transactions (24%): This section has 18 questions on buy side and sell side transactions, the fairness opinion and, of course, SEC rules and regulation. It also tests your knowledge of tender offer regulations and financial restructuring.