Series 86/87: An Overview

Passing the Series 86/87, also known as the Research Analyst Exam, is a required step for finance professionals who want to produce the in-depth reports that investors use to choose investments.

Key Takeaways

  • Series 86 tests understanding of financial metrics, earnings modeling methods, and industry dynamics. All are needed to produce useful and accurate financial reports.
  • Series 87 tests knowledge of ethics and best practices for the industry.
  • The tests are administered by the Financial Industry Regulatory Authority (FINRA).

Professionals who pass the exam can work as research analysts for broker/dealers. The test is administered by the Financial Industry Regulatory Authority (FINRA).

Research analysts create timely reports on potential investment opportunities that are distributed to internal sales staff, institutional investors, and other clients of broker/dealers. The research reports are key documents used by individuals and institutional investors considering specific investments.

Series 86/87 Explained

The Series 86/87 exam is actually two exams in one.

  • The Series 86 section, or Part I, tests knowledge of the field. It contains 100 scored questions and 10 unscored pretest questions. Candidates have a total of four-and-a-half hours to complete the Series 86. A score of 73% or better is required for passing.
  • The Series 87 section, or Part II, tests regulatory administration and best practices for the profession. It contains 50 questions and five unscored pretest questions, all focusing on rules and ethics. Candidates are given one hour and 45 minutes to complete the Series 87. A score of 74% or better is required to pass. 

Those who have passed the Series 86/87 are permitted to prepare written or electronic communications that analyze equity securities, companies, and industry sectors. 

What You Need to Know to Pass Series 86/87

The exam requires a thorough knowledge of company and industry analysis methods, and management study. It requires an understanding of the broad supply and demand parameters for a given industry or sector.

Anyone who prepares an analysis of equity securities that may be used as the basis for an investment decision is required to register as a research analyst.

Candidates must understand financial metrics as well as earnings modeling methods and the industry dynamics that underly useful and accurate financial reports.

The analysis-focused Series 86 contains the following parts:

  • Function 1: Information and Data Collection
  • Function 2: Analysis, Modeling, and Valuation

 The regulatory and best-practices-focused Series 87 contains the following parts:

  • Function 3: Preparation of Research Reports
  • Function 4: Dissemination of Information

Series 86/87 Exemptions and Prerequisites

Those who have already passed both Level I and Level II of the Chartered Financial Analyst (CFA) Exam, or both Level I and Level II of the Chartered Market Technician (CMT) Certification Examination, may request an exemption from the Series 86 portion only.

Canidates without a CFA must first pass one of the following prerequisite tests: Series 7, Series 17, Series 37, or Series 38.

Series 86/87 Key Questions

1. What registration and qualification requirements must supervisors of registered research analysts possess?

All registered FINRA research analysts must be supervised by a research principal who will be required to pass the General Securities Principal (Series 24) and either Part II of the Research Analyst Exam-Regulation (Series 87) or the NYSE Supervisory Analyst Examination (Series 16).

2. Are sell-side equity analysts required to register as research analysts and pass the Series 86/87?

Yes. The registration and qualification requirements of Rule 1050 do not distinguish between sell-side and buy-side analysts. Anyone who prepares written or electronic communications that include an analysis of equity securities and sufficient information upon which to base an investment decision is required to register as a research analyst.

3. Does NASD 1050 apply to everyone who works in equity research or just those who write a research report that will be seen by the public?

Rule 1050 applies to associated persons who prepare publicly disseminated research reports. Associated persons who prepare reports for use only by a member's sales force, money managers, or other employees of the firm, and who do not have reason to believe that the reports will be redistributed publicly, would not be subject to this rule.

4. Is a research analyst who is employed by a foreign broker/dealer affiliate of a FINRA member required to register pursuant to Rule 1050 if the member uses that analyst's research reports or distributes in the U.S. in accordance with SEC Rule 15a-6?

A research analyst employed by a non-member affiliate of a FINRA member is not required to register as a research analyst pursuant to Rule 1050 unless the research analyst is an associated person of the FINRA member as that term is defined in the FINRA By-Laws.

Series 86/87: More Information

For more information, see the FINRA's Series 86/87 Content Outline, NYSE Rule 344 Research Analysis and Supervisory Analysts, and NASD Rule 1050 Research Analysts. For test-day logistics and protocols, see FINRA's On the Day of Your Exam.