Series 6

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What is 'Series 6'

The Series 6 is a securities license entitling the holder to register as a company's representative and sell mutual funds, variable annuities, and insurance premiums. Holders of the Series 6 license are not permitted to sell corporate or municipal securities, direct participation programs and options. Series 6 may also refer to the exam granting the Series 6 license.

BREAKING DOWN 'Series 6'

The Series 6 is a license sought buy professionals in the financial services industry. Common jobs utilizing the Series 6 license include financial advisors, retirement plan specialists, investment advisors and private bankers.

In order to obtain the Series 6 license, candidates must pass the Investment Company/Variable Contracts Products Limited Representative (Series 6) exam. The Series 6 exam is administered by the Financial Industry Regulatory Authority (FINRA) (formerly the National Association of Securities Dealers (NASD)), and covers topics on mutual funds, variable annuities, securities and tax regulations, retirement plans and insurance products. A passing grade is achieved by correctly answering at least 70 of 100 questions correctly within two hours and 15 minutes.

The test costs $100. If not passed up to three times, individuals must wait 30 days before taking the exam again. After three consecutive failed attempts, candidates must wait 180 days before taking the exam again. Candidates must be sponsored by a member of FINRA or a self-regulatory organization (SRO) in order to take the exam. Upon receiving a passing grade, candidates must then register with FINRA through their sponsoring firm in order to transact authorized securities. Holders of the Series 6 are considered limited representatives of their sponsoring firm. As a limited representative they can sell mutual funds, variable annuities and insurance premiums.

Test Outline

As outlined by FINRA in 2017, the Series 6 exam covers four specific sections:

  • Regulatory fundamentals and business development 
  • Ability to evaluate customers’ financial information, identify investment objectives, provide information and make suitable recommendations
  • Ability to open, maintain, transfer and close accounts, and retain appropriate account records
  • Ability to obtain, verify and confirm customer purchase and sale instructions

The test follows a ‘bell curve’ shape in difficulty, starting out relatively simple, becoming difficult in the middle, and then progressively getting easier again.

Series 6 Functions Explained

Section 1 requires the examinee to have knowledge of the following:

  • General industry regulations, including SEC, SRO and state requirements
  • Registration, qualification, continuing education and termination of employment of associated persons
  • Permitted activities for registered and non-registered associated persons
  • Product definitions and classifications
  • Required approvals and content standards of public communications: retail communications, institutional communications, correspondence, research reports, telephone solicitations
  • Appropriate use of professional designations
  • Definition of regulated investment company by the Internal Revenue Code
  • “Conduit” or “pipeline” theory, required distribution of income and realized capital gains
  • “Do-not-call” lists and other telemarketing requirements
  • Content and delivery of prospectuses, Statement of Additional Information (SAI), and other offering documents
  • Networking arrangements
  • Regulations related to marketing and prospecting
  • Initial privacy disclosures to customers
  • Definitions of retail communications, institutional communications and correspondence, including categorization of public appearances, seminars and related sales literature and advertising
  • Regulations regarding communications with the public
  • Standards and approval of communications 

Section 2 requires the examinee to have knowledge of the following:

  • Essential facts regarding customers and customer relationships
  • The financial and personal profiles of customers including age, other investments, financial situation and needs, tax status, investment objectives, investment experience, investment time horizon, liquidity needs and risk tolerance
  • Reasonable-basis suitability, customer-specific suitability and quantitative suitability
  • Investment strategies and recommendations to hold
  • Investment profile and strategies
  • Types of investment returns, for example, dividends, capital gains, return of capital
  • Securities markets, including exchange markets, over-the-counter (OTC)/negotiated markets and new issue markets
  • Fair dealings with customers and appropriate business conduct
  • FINRA’s cash and non-cash compensation regulations
  • Insider trading and prohibited activities
  • Capitalization, pricing, secondary market trading and redeemability​
  • Types of underlying securities
  • Other investment types, including but not limited to: exchange traded funds (ETFs) and hedge funds
  • Variable annuities, deferred variable annuities and variable life insurance policies
  • Tax considerations
  • Definitions, characteristics and concepts of products, types of accounts and plans
  • Price and yield terms, for example, bid, ask, NAV, premium and par
  • Tax treatment, contributions, accumulation, withdrawals, account ownership, beneficiaries, benefits, required minimum distributions, and rollovers and transfers
  • Retirement and tax advantaged plans
  • Open-end investment company
  • Mutual fund
  • Variable annuity and variable life insurance
  • Unit Investment Trust (UIT)
  • Closed-end fund
  • Investment risk factors for credit, currency, inflation, interest rates, liquidity, market risk, social and political risk, reinvestment and market timing
  • Concept of risk/reward and the effects of diversification
  • Types of investment strategies
  • Sources of market and investment information. For example, news outlets, internet, rating agencies and research reports
  • Economic factors such as inflation, deflation, monetary policy and economic policy
  • The role of the Federal Reserve Board
  • Changing interest rates and the effect on money supply, fiscal policy, federal taxation and spending
  • International economic factors. For example, currency exchange rates, balance of trade and gross domestic product

Section 3 requires the examinee to have knowledge of the following:

  • Account registration types, for example individual, JTWROS​ and UGMA
  • Distribution elections including cash and reinvestment
  • Customer screening like the Customer Identification Program (CIP) and determining whether a customer is an associated person of another broker-dealer
  • Account authorizations and legal documents including power of attorney, authorized account user, discretionary accounts, Transfer on Death (TOD) and beneficiary forms
  • Recordkeeping
  • Customer account record maintenance
  • Transferring customer accounts between broker-dealers
  • Account registration changes and internal transfers
  • Delivery of annual reports and notices of corporate actions, for example, proxy statements
  • Anti-Money Laundering (AML) compliance procedures, program and reporting
  • Circumstances for notifying FinCEN​ or refusing or restricting activity in an account and/or closing accounts

Section 4 requires the examinee to have knowledge of the following:

  • Cash accounts
  • Market terms including trade date, settlement date and ex-dividend date
  • Delivery requirements and settlement of transactions
  • Trade execution activities including market timing, late trading, prompt payment for securities purchased, extension of time, frozen accounts and prohibition on arranging loans for others
  • Information required on an order ticket
  • Sharing of referral fees and commissions
  • Confirmations and account statements
  • Customer complaint procedures
  • Arbitration procedures
  • Investigations and sanctions

Maintaining the Series 6 License

To keep the Series 6 license, licensees must fulfill continuing education requirements and be sponsored by a FINRA registered company. Details about continuing education can be found here: FINRA continuing education.

FINRA’s continuing education program includes two elements: a regulatory element and a firm element. FINRA requires licensees to complete a computer-based training session within 120 days after there second anniversary of registration. FINRA also requires the computer-based training session every three years thereafter.

The firm element requires broker-dealers to establish and maintain a continuing education program. (See also Keeping Up with Your Continuing Education.)

For more information about the Series 6 see also What are the differences between the Series 6 exam and the Series 7 exam? and Tips for Passing the Series 6 Exam.