The Series 51 is an exam individuals must take if they wish to achieve a management position in a firm trading bonds, debt instruments, or securities. The exam is most popular in the United States, where the Financial Industry Regulatory Authority (FINRA) is an independent agency responsible for regulating American securities companies. While individuals can take the Series 51 exam through FINRA, the Municipal Securities Rulemaking Board (MSRB) is the agency responsible for ensuring brokerage houses and firms have the necessary education and training when selling investment products in the open market.
The MSRB is an institution established by the U.S. Congress for the purpose of promoting a fair and efficient securities market within the country. Congress heavily regulates the securities market to ensure no improprieties occur unnoticed, especially in light of several major scandals that occurred in recent history. Many of these issues are Ponzi schemes, where investors bilk money out of several individuals and businesses.
Prior to taking the Series 51 and earning this certification, individuals must pass the Series 24 and Series 26 exams. These exams cover in some detail information relating to the sale of general securities and the use of variable contracts within an investment company, respectively. These two exams provide a background for the technical nature of selling debt and equity securities in the open market to individuals and businesses. FINRA is responsible for issuing these exams and grading them.
The Series 51 exam is a detailed test consisting of 60 questions, with individuals allotted two hours for completing the exam. The exam is in multiple choice format and requires individuals to achieve a minimum passing score of 70 percent. Content will cover issues on mutual fund characteristics, supervising sales staff, rules regarding fair practice, underwriting, disclosure rules, and market terminology. While study time is different for each individual, a common guide is two hours a day for two weeks. The MSRB offers a study outline, although more in-depth materials are also needed to study for the exam.
The MSRB classifies municipal securities professional into three groups: limited principals, securities representatives, and securities principals. Limited principals only manage or supervise transactions relating to items like the 529 college savings plan, securities representatives focus on the selling or trading of investments, and securities principals are allowed to manage a full brokerage house that engages in the sales of securities and investments. The Series 51 exam is a requirement to obtain the management positions for a securities principal.
