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Series 86 and 87 Exam for Financial Industry Regulatory Authority (FINRA) Latest Update
Series 86 and 87 Exam for Financial Industry Regulatory Authority (FINRA) Latest Update
The Series 86 and Series 87 exams, administered by the Financial Industry Regulatory Authority (FINRA), are vital components for professionals aspiring to work as research analysts in the financial industry. These exams are collectively known as the Research Analyst Qualification Exams and assess candidates' competence in key aspects of equity research, data analysis, valuation, and the preparation and dissemination of research reports. In May 2023, FINRA introduced significant updates to these exams to align them more closely with the current requirements and practices of the financial industry. Below is a detailed exploration of the latest updates and their implications for candidates and firms.
Overview of the Series 86 and 87 Exams
The Series 86 exam focuses primarily on the technical and analytical skills required for research analysts. It evaluates a candidate’s ability to collect, analyze, and interpret data to produce financial models, valuations, and forecasts. This exam is heavily quantitative and requires a strong foundation in financial analysis, statistics, and valuation methodologies.
The Series 87 exam, on the other hand, addresses the ethical, regulatory, and compliance aspects of being a research analyst. It tests candidates on their understanding of the rules governing research report preparation, conflicts of interest, and the dissemination of financial research.
Together, these exams ensure that research analysts possess both the technical expertise and the ethical awareness required to perform their roles effectively.
Key Updates to the Series 86 Exam
The Series 86 exam underwent several notable changes in 2023. These updates aim to streamline the testing process, ensure relevance to contemporary industry practices, and improve the overall testing experience for candidates. Here are the main revisions:
Reduction in Scored Questions
The number of scored multiple-choice questions was reduced from 100 to 85. This reduction was implemented to enhance the focus on critical areas of knowledge while minimizing redundancy.
Despite the decrease in the number of questions, the total time allotted for the exam remains at 4 hours and 30 minutes, giving candidates more time to think critically and analyze each question.
Restructured Exam Content
The exam content has been reorganized into three primary job functions:
Function 1: Information and Data Collection (18 questions): This section assesses candidates’ ability to gather relevant financial and market data, ensuring they can identify credible sources and evaluate the quality of information.
Function 2: Data Verification and Analysis (28 questions): This function evaluates analytical skills, focusing on data validation, trend analysis, and interpretation of key financial metrics.
Function 3: Valuation and Forecasting (39 questions): This section covers advanced topics such as financial modeling, valuation techniques, and future performance forecasting, which are critical for equity research.
Enhanced Focus on Practical Application
The updated exam emphasizes practical scenarios and real-world applications. Questions are designed to simulate challenges faced by research analysts, ensuring that candidates can apply their theoretical knowledge effectively in professional settings.
Key Updates to the Series 87 Exam
The Series 87 exam also underwent changes to better reflect the regulatory landscape and the ethical considerations of the financial industry. Here are the primary updates:
Retained Structure with Updated Content
The exam continues to consist of 50 scored multiple-choice questions, with a time limit of 1 hour and 45 minutes.
While the structure remains unchanged, the content has been updated to align with current regulations and industry standards.
Revised Job Functions
The exam content is now divided into two main functions:
Function 4: Preparation of Research Reports (36 questions): This section evaluates candidates’ ability to create accurate, compliant, and unbiased research reports. Topics include report writing, disclosure of potential conflicts of interest, and adherence to regulatory standards.
Function 5: Dissemination and Marketing of Information (14 questions): This section focuses on the ethical and regulatory aspects of distributing research to clients and the public. It covers topics such as fair marketing practices, compliance with advertising standards, and ensuring transparency in financial communication.
Focus on Ethical and Regulatory Compliance
The revised Series 87 exam places greater emphasis on ethical considerations and the importance of maintaining integrity in research practices. Candidates are tested on their ability to navigate complex scenarios involving conflicts of interest, insider information, and compliance with FINRA regulations.
Implications of the Updates
The 2023 updates to the Series 86 and 87 exams have several implications for candidates, firms, and the financial industry as a whole:
Enhanced Relevance
By updating the exam content to reflect current industry practices, FINRA ensures that newly qualified research analysts possess the skills and knowledge needed to succeed in today’s dynamic financial environment.
Improved Candidate Experience
The reduction in the number of questions on the Series 86 exam and the increased time per question aim to reduce test-taking stress and allow candidates to focus on demonstrating their analytical abilities.
Greater Emphasis on Ethics and Compliance
The updates to the Series 87 exam highlight the growing importance of ethical conduct and regulatory compliance in the financial industry. By prioritizing these areas, FINRA reinforces its commitment to maintaining the integrity of financial research.
Increased Demand for Preparation
Candidates preparing for the updated exams must adapt to the new structure and content. This may involve focusing more on practical applications, case studies, and real-world scenarios during their study process.
Alignment with Industry Needs
The revised exams ensure that research analysts are well-equipped to meet the expectations of employers and clients. By emphasizing both technical skills and ethical awareness, the exams prepare candidates to navigate the complexities of modern financial markets.
Preparing for the Updated Exams
To succeed in the updated Series 86 and 87 exams, candidates should consider the following preparation strategies:
Review the Revised Content Outline
FINRA provides a detailed content outline for each exam, which includes the updated job functions and key topics. Candidates should familiarize themselves with this outline to understand the scope of the exams.
Focus on Practical Scenarios
Given the increased emphasis on real-world applications, candidates should practice analyzing case studies, building financial models, and writing sample research reports.
Stay Updated on Regulations
For the Series 87 exam, staying informed about the latest FINRA rules, SEC regulations, and industry standards is essential. Candidates should review regulatory updates and compliance guidelines regularly.
Utilize Study Resources
Many test preparation providers offer updated study materials, practice exams, and training courses tailored to the revised Series 86 and 87 exams. Leveraging these resources can enhance candidates’ preparation.
Practice Time Management
While the updated exams allow more time per question, candidates should practice pacing themselves to ensure they can complete all questions within the allotted time.
Conclusion
The 2023 updates to the Series 86 and 87 exams represent a significant step forward in ensuring that research analysts are well-prepared to meet the challenges of the modern financial industry. By focusing on practical applications, ethical conduct, and regulatory compliance, FINRA has created exams that align closely with the skills and knowledge required for success in this field. Candidates preparing for these exams should embrace the changes and approach their preparation with a focus on both technical proficiency and ethical integrity.
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