Syndication Attorney Tips: Series 65 Checklist

For decades, many participants in the securities industry complained that a person’s financial situation should not be the sole determining factor as to whether the prospective investor was accredited and thus eligible to invest in certain private investments.

After all, we all know extremely wealthy individuals who are not the sharpest tools in the proverbial shed. And we all have been around investors of modest financial means who are the smartest people in the room.

I’ve spoken at length about the current definitions and the expanded definitions of what constitutes an Accredited Investor, so I won’t go into detail here. If you are unfamiliar with the old definition and the updates, I encourage you to review this video I did for our good buddy Ken McElroy earlier this year.

Series 65 Background

The Series 65 license, known as the Uniform Investment Adviser Law Examination, qualifies individuals to provide investing and general financial advice to clients. Passing the Series 65 exam qualifies individuals as Investment Advisor Representatives.

However, to become accredited, you must do more than simply obtain the license. You must also register as an investment advisor with your state’s regulatory body.

So it’s really a 2-step process. First, get the license by taking the exam. Second, register with your State.

In some instances, however, you may not even have to take the exam if you are one of the following and in good standing:

Certified Financial Planner (CFP) Chartered Financial Analyst (CFA), Personal Financial Specialist (PFS), Charter Financial Consultant (ChFC) Chartered Investment Counselor (CIC)

Remember, each state is different and has its own securities regulatory body, so if you have one of these designations, it is good practice to check with your state securities regulator to make sure.

Series 65 CHECKLIST:

Register for an online account with FINRA

You will need to register for an online account in order to schedule your appointment to take the exam.

Make an Appointment to Take the Exam

Once you register, you must make the appointment to take the exam before the expiration date shown on the Notice of Enrollment, which is usually around 120 calendar days. After that, the enrollment expires, and you forfeit your fee. You will then need to re-register.

Schedule and Pay For the Series 65 Exam

The cost is $175. (Note: If they request a sponsoring firm, mark it as “not applicable” since you don’t have one.)

Study for the Exam

The Series 65 Exam is not one that you can easily pass without some preparation. In fact, many companies offer training like Kaplan or ExamFX (this is not an endorsement) for around $300.

Take the Exam and Pass

The exam consists of 130 multiple-choice questions and covers economic factors and business information, investment vehicle characteristics, client investment recommendations and strategies, laws, regulations, and guidelines on unethical business practices. You will have 3 hours to complete the exam and must get 72% of the questions correct in order to pass.

Complete the License Application

After passing the Series 65 test, you will complete your license application with a background check and need to pay state fees for your state of domicile. You can check your license status through FINRA’s Central Registration Depository (CRD) during the licensing process.

Find a Registered Investment Advisor Firm In Your State

The most challenging part of the entire process is finding an RIA firm in your state that you can hang your license under. If this is not feasible, you can create your own RIA firm in your State and hang your license under your own firm. Considering that you will have no plans to market your services or represent clients (remember you are just looking to become an accredited investor), starting your own firm is not too complicated. Even with professional consulting, the cost should be under $5,000. Think of this as the start-up cost to become an Accredited Investor and have access to a whole new world of investments.

Register with Your State

After successfully passing the Series 65 test, you will register as an Investment Advisor Representative with the applicable state securities regulators. You will need to contact your Registered Investment Advisor firm (unless you have your own) and ask the firm to submit your completed Form U4 through the WebCRD system. Each State is slightly different, but here is a great resource for each State. 

Stay Current with your Continuing Education Requirements

Like most licensed professionals, in order to keep your license current, you must participate in continuing education for securities licenses, including regulatory element training through FINRA and a firm element program through your sponsoring firm.

And there you have it. The current shortest path to becoming an Accredited Investor if you don’t meet the financial requirements currently in place.

This checklist is for educational and information purposes only. It is not intended to nor should it be construed as legal advice. Any opinions expressed by the author should be considered personal and not relied upon as legal advice. The author strongly recommends that the reader consults with competent securities counsel before raising money.

This blog post is intended to provide general information and should not be construed as, and does not constitute legal advice on any specific matter, nor does this message create an attorney-client relationship with Premier Law Group.