What is a Registered Representative?
A Registered Representative (RR) is a professional who represents clients in transactions involving investment products and securities, typically working for financial firms such as brokerage companies. RRs serve in roles such as brokers, financial advisors, or portfolio managers and must meet rigorous licensing and ethical standards.
Key Takeaways
- RRs facilitate client transactions in securities markets, such as buying and selling stocks and bonds.
- To become licensed, RRs must pass exams like Series 7 and Series 63 and adhere to strict regulations set by FINRA and the SEC.
- RRs are governed by a suitability standard, which ensures that recommended investments align with a client’s financial needs and profiles.
In-Depth Understanding of Registered Representatives
Registered Representatives are crucial to the securities trading ecosystem. To legally execute trades, they must be licensed to handle specific types of securities. Their career begins with passing the Series 7 Exam, allowing them to manage stocks, mutual funds, options, municipal securities, and certain variable contracts like insurance products. RRs must also meet updated requirements, including passing the Securities Industry Essentials (SIE) Exam since 2018.
The Series 63 License is another significant qualification, focusing on state securities regulations, enabling RRs to trade variable annuities and unit investment trusts. Additional licenses, like Series 65 or Series 66, help RRs broaden their service offerings.
Series 7 Exam
The Series 7 Exam upholds a high standard for competency and ethics, which all aspiring RRs must pass to engage in a broad spectrum of securities transactions.
Standards for Registered Representatives
Most investors work with RRs for executing trades efficiently and ensuring suitable investment opportunities. This standard requires RRs to confirm the suitability of investments based on clients’ financial situations and profiles.
RRs vs. RIAs
Registered Representatives and Registered Investment Advisors (RIAs) differ significantly in their service approaches and governing standards. RRs focus on transactional services and adhere to suitability standards, while RIAs offer wide-ranging financial planning grounded in fiduciary responsibilities. Fiduciary standards necessitate that RIAs place clients’ best interests above their own, a higher benchmark compared to the suitability obligation for RRs.
Identifying a Registered Representative
When selecting a registered representative, investors have numerous choices among financial firms. Discount brokers like Charles Schwab provide various levels of service, including dedicated registered representative support for executing trades via call centers at lower fees.
TIP: Utilize tools like FINRA’s BrokerCheck to investigate the professional and disciplinary history of RRs and brokerage firms.
Disqualifying Factors
Certain adverse activities can disqualify a person from becoming or remain being a registered representative, including specific criminal convictions, regulatory expulsions, and false statements to regulatory bodies. Each regulatory agency outlines specific criteria for disqualification, often detailed on their respective websites.
Becoming a Registered Representative
Aspiring RRs must be sponsored by a FINRA-registered firm and pass essential exams, starting with the SIE and followed by specialized tests like the Series 7.
Registered Representative Income
RR salaries vary widely depending on location and experience. Average earnings in the U.S. hover between $47,000 to $58,000 annually, with potential for significantly higher incomes in certain cities.
Securities a Registered Representative Can Sell
A General Securities Representative may handle an array of investment options like corporate and municipal securities, mutual funds, and variable annuities. Specialist licenses are available for trading specific securities, such as municipal bonds alone.
Conclusion: The Value of a Registered Representative
Registered Representatives play a vital role in the finance industry by delivering investment advice, executing trades, and managing client portfolios under rigorous regulatory standards. Their professionalism ensures clients’ trades align with suitable investments, maintaining the integrity of the financial market.
Related Terms: Broker, Series 7 Exam, Series 63 Exam, Financial Industry Regulatory Authority, Securities Exchange Commission, Registered Investment Advisor.
References
- Financial Industry Regulatory Authority. “2111. Suitability”.
- Financial Industry Regulatory Authority. “Qualification Exams”.
- Financial Industry Regulatory Authority. “Series 7 – General Securities Representative Exam”.
- Financial Industry Regulatory Authority. “Exam Restructuring”.
- Financial Industry Regulatory Authority. “Series 63 – Uniform Securities Agent State Law Exam”.
- U.S. Securities and Exchange Commission. [“Staff Bulletin [“1"]: Standards of Conduct for Broker-Dealers and Investment Advisers Care Obligations”](https://www.sec.gov/tm/standards-conduct-broker-dealers-and-investment-advisers).
- FINRA. “General Information on Statutory Disqualification and FINRA’s Eligibility Proceedings.”
- Financial Industry Regulatory Authority. “Form U-4”. Pages 12-14.
- Financial Industry Regulatory Authority. “Disqualification Criteria”.
- ZipRecruiter. “Registered Representative Salary”.
- Indeed. “Registered Representative Salary in United States.”
