Passing the Series 79 exam is required for applicants of entry-level jobs as investment banking representatives. This test is a necessary step to obtaining registration for the job in addition to the Securities Industry Essentials (SIE) exam. 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 it’s deceptively difficult.
Key Takeaways
- Financial professionals who want to work in investment banking are required by the Financial Industry Regulatory Authority to pass the Series 79 exam.
- Candidates must be sponsored by a FINRA member to take the exam.
- It’s a multiple-choice test with 75 questions covering topics including debt and equity offerings, mergers and acquisitions, and financial restructuring.
- The exam takes 150 minutes and is taken on a computer.
- A passing grade is 73% or above.
Focus on Investment Banking
The Series 7 was required of all financial professionals before 2009, including those who wanted to become investment bankers. Investment banking is only a small portion of the Series 7 exam, most of which is more relevant to the functions and services of retail securities firms. After conducting a job analysis, an investment banking committee agreed on the major duties, job functions, and tasks associated with those working in the field. This allowed changes to be made.
The Securities and Exchange Commission (SEC) approved the new Series 79 exam in 2009. This test is also known as the Investment Banking Representative Qualification Examination and is commonly referred to as the Limited Representative Investment Bankers exam because it was designed for entry-level investment bankers.
An individual will likely need the Series 79 license for specific areas of finance. 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.
Series 79 Exam Prerequisites
The Series 79 exam satisfies the Series 24 prerequisite as a representative exam. It focuses on investment banking so the Series 24 General Securities Principal is limited to investment banking supervisory responsibilities if the candidate has only passed the Series 79 exam.
Testers generally need the 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. Candidates may need the Series 79 to work in several key areas including debt, equity, or mergers and acquisitions (M&A).
Debt or Equity Offerings
Companies have several options available to them when they need to raise money. They may issue a debt or equity offering in addition to borrowing money from a financial institution.
- A debt offering normally comes in the form of a coupon or corporate bond in which the issuer promises to pay the bondholder or investor their principal investment along with interest by a certain date.
- An equity offering involves the issuance of new shares of corporate stock. This gives investors an ownership stake in the company.
Debt or equity activities that may require a series 79 include:
- Pricing of securities in debt and equity offerings
- Origination, which deals with equity capital markets and debt capital markets
- Underwriting
- Marketing
- Structuring
- Syndication
- Managing the allocation and stabilization activities of offerings
Mergers and Acquisitions (M&A) and Restructuring
Advisory services are an essential part of an investment banker’s role particularly with regard to mergers and acquisitions. M&A refers to the consolidation of companies or assets. This can take place through several financial transactions. Some responsibilities that a Series 79 might be required for under this category can include:
- Tender offers
- Selling assets
- Corporate reorganization or divestitures
- Transactions involving business combinations, which might include rendering solvency and fairness opinions
Series 79 Exceptions
Series 79 registration may not be required for professionals who have limited involvement in investment banking activities. There’s some leeway in some jobs in which new associates rotate among various business areas and departments for training purposes. These financial professionals are generally given a six-month grace period while they’re training. You can look at FINRA Rule 1230 for a complete guide to exemptions.
The Exam
A tutorial on the exam is provided before taking it. It consists of 75 multiple-choice questions and is completed on a personal computer. Each candidate’s exam includes 10 additional questions that don’t contribute to the candidate’s score.
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. Individuals must answer 73% of the questions correctly for a passing score.
Candidates must be sponsored by a FINRA member to take the exam. Requirements for eligibility include taking the appropriate qualification examination. Individuals are required to pass both the Series 79 and SIE exams to become registered.
You don’t have to take the Series 79 and the SIE exams at the same time.
Test Sections
The test includes three sections. The 10 additional questions are scattered randomly throughout and aren’t identified as such.
Collection, Analysis, and Evaluation of Data
This is the largest section, taking up 49% of the exam with 37 questions. It includes identifying the relevant data and knowing where to find it. You may have to know what will be in proxy statements Form 14A or Form 4s for beneficial ownership of directors.
This section also deals with communicating with various departments and clients, using metrics and ratios, and analyzing trends to evaluate what you’ve found in the firm and sector data.
Candidates are also tested on their understanding of due diligence activities in this section such as the regulatory requirement for the buy and sell sides.
Underwriting/New Financing, Offerings, and Securities Registration
This section has 20 questions, making up 27% of the test. It deals with regulations for filing and registering securities. This includes forms such as the prospectus as well as rules and the required financial statements. It also covers the distribution of marketing materials and any associated rules.
M&A, Tender Offers, and Financial Restructuring
This section is roughly 24% of the exam with a total of 18 questions.
Some of the issues covered in this part of the exam relate to buy-side and sell-side transactions, fairness opinion, and SEC rules and regulations. It also tests a candidate’s knowledge of tender offer regulations and financial restructuring.
Is the Series 79 Easier Than the Series 7?
The Series 79 and Series 7 are different exams required of financial professionals who want to obtain registration by FINRA. The Series 7 is required by all securities representatives at the entry level and the Series 79 exam is a requirement for anyone who wants to work as an entry-level investment banker.
The Series 79 exam is 75 questions and takes 2.5 hours while the Series 7 is made up of 125 questions and takes three hours 45 minutes to complete.
How Hard Is the Series 79 to Pass?
The Series 79 exam is more difficult than the Securities Industry Essentials exam. The SIE exam is commonly considered an introductory exam while the Series 79 involves concepts that may be more complex. It’s required of those who need a higher degree of skills in the investment banking industry.
How Do I Prepare for the Series 79 Exam?
You can take several Series 79 prep courses to prepare yourself for the exam. These courses will provide you with study materials and practice tests. Many of them come at a cost, however, ranging from $200 to $300.
Who Needs to Take the Series 79 Exam?
Financial professionals who want to work as entry-level investment bankers are required to take and pass the Series 79 exam. Candidates must also pass the Securities Industry Essentials exam to obtain registration but it isn’t required that the exams must be taken together.
The Bottom Line
Anyone who wants to perform certain duties in the financial industry must become a registered representative with the Financial Industry Regulatory Authority. Individuals must pass certain exams to become registered. The type of exam depends on the type of position they seek.
Professionals who want to become entry-level investment bankers must pass the Series 79 exam along with another test, the Securities Industry Essentials exam. The Series 79 tests an individual’s knowledge and skills in several areas including debt and equity offerings, tender offers, mergers and acquisitions, new financing, and financial restructuring.
