Table of Contents
- What Is a Registered Representative (RR)
- Key Takeaways
- Understanding Registered Representatives (RRs)
- Series 7
- Standards for Registered Representatives
- RRs vs. RIAs
- Identifying a Registered Representative
- Past Activities That Can Disqualify You
- How Do You Become a Registered Representative?
- How Much Money Does a Registered Representative Make?
- Which Securities Can a Registered Representative Sell?
- The Bottom Line
What Is a Registered Representative (RR)
Let me tell you directly: a registered representative, or RR, is someone who works for a client-facing financial firm like a brokerage company. You can think of them as the go-between for clients trading investment products and securities. These professionals might be employed as brokers, financial advisors, or portfolio managers.
To operate in this role, RRs have to pass licensing tests and stay regulated by the Financial Industry Regulatory Authority (FINRA) and the Securities and Exchange Commission (SEC). They must adhere to the suitability standard, meaning any investment they recommend has to meet the requirements in FINRA Rule 2111. Before suggesting something, they need to affirmatively answer: 'Is this investment appropriate for my client?'
Key Takeaways
Here's what you need to grasp: an RR is a financial professional authorized to handle client transactions in the securities markets. They must pass strict licensing requirements, including the Series 7 and 63 exams, and follow rules from FINRA and the SEC. Additionally, they uphold the suitability standard, and there's ongoing talk among regulators about moving to the stricter fiduciary standard.
Understanding Registered Representatives (RRs)
Registered representatives can buy and sell securities for you as a client. They're mainly known for providing transaction-based services. To do this, they need to be licensed for the specific securities and sponsored by a FINRA-registered firm.
If you're aiming to become one, you must pass the Series 7 and Series 63 exams administered by FINRA. The Series 7 lets you deal in stocks, mutual funds, options, municipal securities, and certain variable contracts like insurance or annuities. Since October 2018, you also need to pass the Securities Industry Essentials (SIE) Exam along with the Series 7 to register as a General Securities Representative.
The Series 63 covers trading variable annuities and unit investment trusts, with a big focus on state securities requirements across the U.S. You might need other licenses for different transactions, and adding Series 65 or 66 can expand what you can do.
Series 7
The Series 7 license sets a standard level of competency and ethics for RRs in the securities industry. That's its core purpose.
Standards for Registered Representatives
Investors like you turn to RRs to execute financial market transactions as brokers or agents. These representatives usually have access to a wide range of trading capabilities that match your needs, including thinly traded securities or new launches.
RRs vs. RIAs
Know the difference: registered representatives follow suitability standards, while registered investment advisors (RIAs) adhere to fiduciary standards. RRs are transaction-based, ensuring investments suit your profile and trades are efficient. You'll pay sales charges set by securities issuers when working with them.
RIAs, on the other hand, provide holistic financial plans and investing services with fee schedules based on assets under management. They're held to fiduciary standards that require putting your best interests first, no matter what. This is a higher bar than what RRs face.
Identifying a Registered Representative
If you're looking for an RR, you'll find plenty of options in the market. Firms like Charles Schwab offer discount and full-service brokerage. For example, you can place electronic trades at a discount, or call their RR center to speak with a broker. They also have full-service account executives for broader trading support.
Use FINRA's BrokerCheck to research a broker's or firm's experience and disciplinary record. It's a straightforward tool for that.
Past Activities That Can Disqualify You
Certain events can stop you from becoming an RR or cause you to lose your registration. Under the Securities Exchange Act of 1934, FINRA outlines statutory disqualifications, which include things like criminal convictions—misdemeanors for 10 years, felonies permanently—court injunctions on unlawful securities activities, expulsions or bars from self-regulatory organizations, suspensions by agencies like the SEC or CFTC, denials of registration, findings by foreign entities, false statements in applications, final orders barring association due to fraud, willful violations of securities laws, or associations with disqualified persons.
This is a summary from FINRA Form U-4; check their detailed process for the full picture.
How Do You Become a Registered Representative?
To become an RR, get sponsored by a FINRA-registered brokerage firm and obtain the necessary licenses. For the General Securities License, pass the SIE exam and the FINRA Series 7 exam.
How Much Money Does a Registered Representative Make?
Salaries vary by location and experience. As of April 2024, ZipRecruiter shows a national average just under $47,000, but it can double in some cities. Indeed reports a similar range, with a national average under $58,000 and salaries from $29,000 to $117,000.
Which Securities Can a Registered Representative Sell?
A General Securities Representative can sell corporate and municipal securities, investment company securities, variable annuities, and government bonds. Other FINRA exams allow specializing in one type, like municipal bonds.
The Bottom Line
In essence, a registered representative is a licensed professional who buys and sells securities for clients, provides investment advice, executes trades, and manages portfolios.
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