Definition, Requirements, Topics, and Difficulty

The Series 63, officially known as the Uniform Securities Agent State Law Examination, has been a staple of the financial industry for almost half a century. Managed by the North American Securities Administrators Association (NASAA) and administered by the Financial Industry Regulatory Authority (FINRA), this exam aims to ensure that securities agents understand state-specific regulations and ethical practices.

The exam reflects the evolving landscape of financial regulation in the U.S. The Series 63 exam has been instrumental in shaping how securities are sold and who is allowed to sell them, ensuring that financial representatives adhere to ethical standards that protect investors. The exam was born out of necessity—an effort to unify a patchwork of state regulations that once made it almost impossible for brokers to operate across state lines.

Below, we take you through what you need to know about the Series 63, what’s on it, and what it means for the professionals who have to take it.

Understanding the Series 63

In the late 1970s, as financial markets expanded rapidly, so did the complexity of the regulations governing them. Each state had its own rules, creating a labyrinthine legal environment for securities professionals. Brokers faced the daunting task of navigating inconsistent state laws, which often meant passing multiple exams just to conduct business in neighboring states. Recognizing the problem, NASAA introduced the Series 63 exam in 1979 as a standardized test for professionals to qualify across most states.

The Series 63 was more than just a convenience for brokers. It represented a significant shift toward regulatory consistency and investor protection. The exam covers the principles of state securities regulation, focusing on rules that prevent fraud, promote transparency, and ensure fair dealing. As financial markets became more interconnected, the importance of a common regulatory framework grew, eventually making the Series 63 a cornerstone for broker registration.

The exam tests knowledge of state securities regulations, particularly the rules governing ethical business practices and investor protection. Unlike other exams focusing on federal securities laws, the Series 63 exam emphasizes “blue sky laws” against financial fraud that regulate securities at the state level, ensuring that representatives understand the legal obligations they must uphold within individual states.

The exam consists of 60 multiple-choice questions on registration procedures, ethical practices, fiduciary duties, and the handling of client accounts. Candidates must correctly answer at least 43 questions to pass. While the exam is shorter and less comprehensive than other securities exams, like the Series 7, its focus on the legal and ethical framework makes it crucial for those seeking to engage in the securities business across multiple states.

Passing the Series 63 is typically required in addition to other qualifications, like the Series 6 or Series 7, making it a foundational credential for anyone looking to sell securities or provide investment advice. The exam’s emphasis on state-specific regulations helps ensure that securities professionals can navigate the complexities of different legal environments, ultimately protecting investors and promoting market integrity.

Series 63 Requirements

Scheduling the Exam

FINRA administers the exam. Here’s how you schedule it, depending on your employment:

• For broker-dealer employees: The firm must file an electronic Form U4 (Uniform Application for Securities Industry Registration or Transfer).
• For individuals not part of a FINRA member firm: Candidates can independently schedule the exam by opening an enrollment window on FINRA’s website and paying a $147 fee.

Exam Format

The Series 63 exam consists of 65 multiple-choice questions with four possible answers for each. Of these, 60 are scored, while five are unscored pretest questions. To pass, candidates must correctly answer at least 43 of the 60 scored questions within a 75-minute time limit.

The exam is designed to measure a candidate’s performance against a predetermined standard, rather than comparing their performance to that of other test-takers. In short, you understand going in what you need to know and how many questions you must get correct to pass.

The Series 63 exam employs a method known as “on-the-fly testing” to ensure fairness, security, and consistency. Here’s what that means:

• Each exam is assembled in real time from a large pool of preapproved questions just before it begins.
• Questions are selected to meet content specifications. This ensures all required topics are covered in the proportions outlined in the exam blueprint.
• The exam is constructed to maintain the same overall difficulty level for all candidates.
• Unlike adaptive tests, the Series 63 doesn’t adjust the questions’ difficulty based on the test-taker’s performance.
• Each candidate receives a different set of questions to maintain security.
• All questions are presented in a fixed order once the exam begins.
• The passing score remains constant: 43 out of 60 correct answers.

Retake Policy

After a failed attempt at the Series 63 exam, the following waiting periods apply:

1. A minimum of 30 days must pass after failing the first exam before the second can be scheduled.
2. A minimum of 30 days must pass after failing the second attempt before the third can be scheduled.
3. A minimum of 180 days must pass after failing the third attempt before the fourth (and each subsequent) attempt can be scheduled.

Post-Exam Considerations

After passing the Series 63 exam, candidates have two years to obtain a state license; otherwise, the exam results will expire in FINRA’s Central Registration Depository.

The exam remains valid as long as you’re registered, with a two-year grace period between jobs. State regulators may grant waivers to individuals who continue working in the financial services industry in a different capacity. While passing the exam may fulfill part of a state’s requirements, it doesn’t grant the right to conduct business until you’re licensed or registered by that state.

Should you need to leave a firm, your employer will file Form U5 to cancel the registration, and then you’ll have two years to secure new employment and re-register. The new employer will submit Form U4 for re-registration.

Exam Topics

The Series 63 covers eight general subjects related to the professional responsibilities of broker-dealer agents. The subjects, weightings, and number of questions are as follows:

1. Regulation of Investment Advisers

• Understanding what constitutes an investment adviser under state and federal law
• Identifying activities that require someone to register as an investment adviser and what isn’t covered by these rules
• Weight: 5%
• Number of questions: 3

2. Regulations of Investment Adviser Representatives

• Recognizing who qualifies as an investment adviser representative (IAR)
• Knowing the activities that require registration as an investment adviser representative and which are excluded
• Weight: 5%
• Number of questions: 3

3. Regulation of Broker-Dealers

• Understanding the legal definition of a broker-dealer
• Familiarity with the initial and ongoing requirements for registering as a broker-dealer, such as the U.S. Securities and Exchange Commission’s filing requirements for Form BD
• Understanding which activities require a broker-dealer to register and what exclusions exist
• Knowing the supervision responsibilities broker-dealers have over their agents
• Weight: 12%
• Number of Questions: 7

4. Regulations of Agents of Broker-Dealers

• Identifying who qualifies as an agent of a broker-dealer
• Understanding the registration process and post-registration obligations for agents
• Recognizing the activities that require an agent to register and any exclusions
• Knowledge of how to update forms like the Uniform Application for Securities Industry Registration or Transfer (Form U4).
• Weight: 13%
• Number of questions: 8

5. Regulations of Securities and Issuers

• Understanding what qualifies as a security and who is considered an issuer
• Knowledge of the requirements for registering securities at the state level
• Identifying the securities and transactions that are exempt from state registration
• Understanding the state’s power to enforce securities laws and combat fraud
• Weight: 9%
• Number of questions: 5

6. Remedies and Administrative Provisions Weight

• Knowing the scope of insurance coverage provided by the Securities Investor Protection Corporation
• Understanding the powers and duties of state securities regulators
• Familiarity with the types of actions state administrators can take, including cease-and-desist orders and license revocations
• Knowing the penalties and liabilities imposed for violations of securities laws
• Weight: 11%
• Number of questions: 7

7. Communication with Customers and Prospects

• Understanding what information must be given to clients and prospects about products
• Knowledge of the prohibitions against making false representations regarding registration status
• Awareness that guaranteeing investment performance is unlawful
• Familiarity with different types of customer agreements, including new account forms, margin agreements, and options agreements
• Understanding the rules governing communications, including social media, email, and other online communications
• Weight: 20%
• Number of questions: 12

8. Ethical Practices and Obligations Weight

• Knowledge of fee structures, commissions, markups, and the requirement to disclose compensation to clients
• Understanding the rules governing custody, discretion, and trading authorization of client funds and securities
• Knowledge of ethical concerns such as excessive trading, loans with customers, insider trading, market manipulation, and exploitation of vulnerable adults.
• Weight: 25%
• Number of questions: 15

Series 63 vs. Other Exams

The Series 63 exam is often required in addition to other exams, particularly for those who will be selling securities across state lines. Other notable exams include the Series 7, which covers federal securities laws and is a major qualification for many broker-dealer representatives; the Series 65, which focuses on investment adviser laws and practices; and the Series 66, which combines elements of both the Series 63 and 65.

While the Series 63 is generally considered less comprehensive than some other exams, it plays a vital role in ensuring that securities professionals understand and follow state-specific regulations. This state-level focus complements the federal-level knowledge tested in exams like the Series 7, creating a comprehensive regulatory framework for the industry.

The table below compares the key Series exams, highlighting their focus, format, and relevance to different career paths in financial services:

The Bottom Line

The Series 63 exam is a critical qualification for securities professionals in the U.S. Developed by NASAA, this exam focuses on state-level securities laws and regulations, often called “blue sky laws.” The primary purpose of the Series 63 is to ensure that securities agents understand and can follow the state-specific regulatory requirements that complement federal securities laws. Most states require passing the Series 63 as a condition for registration of securities agents who conduct business within their borders, making it an essential credential for many financial professionals.

The exam consists of 65 multiple-choice questions, of which 60 are scored, and candidates have 75 minutes to complete it. A score of 72% (43 out of 60 correct answers) is required to pass. Unlike more comprehensive exams like the Series 7, which covers a broad range of securities knowledge, the Series 63 is narrowly focused on state regulations, ethical practices, and the basic principles of state securities acts. It’s often taken with other securities exams, particularly by those seeking to become registered representatives in the broker-dealer industry.