Friday, September 17, 2004

Ever worry about sleeping through a test?

Investment Dealers' Digest

You know that feeling? Maybe you have even done it. The fear of over-sleeping and missing an exam or important meeting. Well now imagine you are the head of SunTrust Robinson Humphrey Equity Capital Markets and all of your research analysts missed the test and therefore can not issue research!

Let's go back and see how this happened! In an attempt to prevent further scandals involving analysts, regulators at the NASD, NYSE, and SEC agreed that analysts had to pass two new tests. From an NASD press release:
"The Securities and Exchange Commission (SEC) recently approved amendments to NASD rules to finalize and implement the research analyst registration requirements and examination program. The registration requirements become effective on March 30, 2004. As of that date, any associated person who
functions as a research analyst must pass the new Research Analyst Qualification Examination (Series 86/87) or qualify for an exemption or waiver. The examination consists of an analysis part (Series 86) and regulatory part (Series 87). Prior to taking either the Series 86 or 87, a candidate must also have passed the ...(Series 7), (Series 17), or "met similar requirements in Canada.
So what happened? Somehow SunTrust Robinson Humphrey Equity Capital Markets (henceforth STRHECM) missed the deadline for filing for the extension AND their analysts had not yet taken the new exam. (Rumors that the reason for the delay was that the firm's name was so long that paperwork took too long could not be confirmed).

While in the end it will no doubt all work out as STRHECM (even the abbreviation is long!) has filed for its analysts to take the test as quickly as possible, but the stress levels at the firm must have been off teh charts!

From Investment Dealers Digest: "Hugh Suhr, a spokesman for SunTrust, said the firm 'undertook the project to get analysts registered in August, and we are almost complete with the process.' He declined further comment. Gerry O'Meara, chief executive officer of the capital markets division, declined to comment."

BTW in case you have not seen the new test, rumor has it that it is rather difficult. Again from IDD: "Part one of the exam, the Series 86, contains 100 questions, for which test-takers are allowed four hours, and deals in part with the topics of information and data collection. It primarily focuses on analysis, modeling and valuation methodologies. Analysts who have passed Levels I and II of the Chartered Financial Analyst examination may be eligible for an exemption from the Series 86 if they have either functioned as research analysts since passing Level II of the CFA exam, or have passed Level II within two years of application for registration as research analysts. Due to its technical bent, the 86 is the exam that most concerns analysts who cannot opt out. The Series 87 deals chiefly with securities law and relevant industry regulations."

Want to see what is on the test? Here is the study guide provided by the NYSE and NASD. (at first glance it does not look that bad, but I would admit that I would have to look over some of the regulations again.

Also in a related point, many people get confused with what tests are needed for what jobs. Here is a list of required financial exams.

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