Mastering the Series 63 Exam: Your Path to Becoming a Licensed Securities Agent

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In nearly every U.S. state, aspiring securities professionals must pass the Series 63 exam—or the Series 66, depending on their other registrations—to become licensed agents authorized to solicit orders for securities within that state.

This exam is a crucial step for those aiming to build a career as a securities agent, a role defined under the Uniform Securities Act (USA) as a registered representative.

Continue reading to explore the core components of the Series 63 exam and gather practical tips to help you achieve the score necessary to advance in your securities career.

Key Insights

• The Series 63 exam certifies individuals to act as securities agents and solicit orders for securities in their state.
• It centers on the Uniform Securities Act, a model set of state laws crafted by securities regulators.
• The North American Securities Administrators Association (NASAA) oversees the Series 63 exam.
• Comprehensive study materials and practice exams are vital to thorough preparation.
• Effective exam strategies include managing your time wisely, reading questions carefully, focusing on definitions, and securing correct answers on easier questions.

Understanding the Series 63 Exam

The Uniform Securities Act is the foundation of the Series 63 exam. Unlike federal laws, it comprises a collection of state laws modeled by an organization of state securities regulators.

NASAA, responsible for the Series 63, as well as Series 65 and 66 exams, emphasizes that candidates should thoroughly understand the Uniform Securities Act along with NASAA's Statements of Policy and Model Rules.

About NASAA

NASAA is a collective of securities administrators—officials charged with enforcing securities laws at the state level. Titles vary by state and include commissioner, director, or secretary of state for securities.

Established in 1919 in Kansas, NASAA predates major federal securities laws and has long aimed to protect the public by standardizing securities regulations to prevent fraud and ensure registration of industry participants.

The Uniform Securities Act earned the nickname "Blue Sky Laws" after a Kansas Supreme Court justice described fraudulent schemes as having no more substance than "so many feet of blue sky."

NASAA remains dedicated to safeguarding everyday investors from fraud, a principle that candidates should keep in mind when studying.

Exam History

The 1956 version of the Uniform Securities Act, drafted by the Uniform Law Commissioners, is the primary basis for most state laws and the Series 63 exam.

Although revisions were made in 1985, 1988, and 2002, widespread adoption of newer versions remains limited.

NASAA has published policy statements and model rules to help states align their laws with federal securities regulations.

Federal and State Law Interplay

Key federal laws impacting the USA include the National Securities Markets Improvement Act of 1996 (NSMIA) and the Gramm-Leach-Bliley Act of 1999 (GLBA).

NSMIA restricts states from duplicating federal regulations on certain securities, defining "federally covered securities" exempt from most state laws.

For example, investment advisors register either federally with the SEC or with states under the USA based on assets managed.

GLBA altered broker-dealer registration, allowing banks in some cases to register as broker-dealers, although most still operate through subsidiaries.

Exam Structure and Content

Series 63 candidates face several challenges, including reliance on the 1956 Uniform Securities Act and difficulty accessing the original text. However, NASAA’s model rules and policy statements are readily available online.

The exam focuses heavily on fraud prevention, with approximately 75% of questions on state securities acts and regulations, and 25% on ethical practices and fiduciary duties.

Important Terminology

• Agents: Registered representatives required to register with the state.
• Broker-Dealers: Must register with the state.
• Investment Advisors and Investment Advisory Representatives (IARs): State registration required unless federally covered.
• Securities: Must be registered unless exempt.
• Fraud and deceptive practices are strictly prohibited.
• Administrators: State officials empowered to enforce the USA.

Familiarize yourself with terms like hypothecation, remuneration, and indemnification as they frequently appear on the exam.

Exam Tip

Questions starting with "The administrator may..." often have "all of the above" as the correct answer, while those beginning with "The administrator must..." usually require selecting a specific list of actions.

Understanding "Exempt" Securities

Terminology around "exempt" can be confusing. Exempt securities are not required to be registered, while non-exempt securities generally must be registered unless traded in an exempt transaction.

According to the 2002 Uniform Securities Act, exempt securities retain their exemption in both initial issuance and subsequent trading, whereas transaction exemptions must be established for each trade.

Common exemptions include:

• U.S. Government and municipal securities, as well as certain foreign government securities.
• Banks, which are regulated sufficiently to be exempt from additional securities registration.
• Institutional investors, who are considered sophisticated and typically exempt from certain regulations.

Whenever possible, exemptions are utilized to avoid unnecessary registration costs and procedures.

Common Exam Challenges

Time Management

The Series 63 exam features 60 multiple-choice questions to be answered in 75 minutes, averaging 1 minute and 15 seconds per question. Time management is critical to avoid rushing.

Practice Is Essential

Regular practice with sample questions and review of unfamiliar terms will improve speed and comprehension, minimizing time lost during the exam.

Complex Question Structures

Many questions use double negatives and complex phrasing. Read carefully but avoid spending excessive time on any single question.

Study Recommendations

Consistent Practice

Engage with quality study materials and practice questions. Answer questions, then immediately review explanations to reinforce understanding.

Focus on Definitions

Master key concepts related to registration and exemptions to gain an advantage.

Prioritize Exam Topics

Allocate study time according to the distribution of questions, emphasizing state securities laws.

Careful Reading

Read questions and answers thoroughly, eliminate incorrect options, and commit to your initial choice to avoid costly second-guessing.

Secure Easy Points

Identify and correctly answer straightforward questions to build a strong foundation.

Monitor Your Time

Simulate exam conditions during practice to develop effective pacing.

What Does Passing the Series 63 Enable You to Do?

Obtaining the Series 63 license authorizes you to act as a securities agent, allowing you to represent broker-dealers and sell various financial securities across states.

Potential Earnings with a Series 63 License

As of mid-2023, the average hourly wage for holders of the Series 63 license is approximately $26.

Understanding the Series 7 Exam

The Series 7 license, issued by FINRA, permits individuals to sell a broad range of securities including corporate, municipal, government, investment company securities, variable annuities, direct participation programs, and options.

Final Thoughts

While the Series 63 exam can be challenging, it is a vital credential for anyone seeking to become a licensed securities agent. With focused study on the Uniform Securities Act and strategic preparation, you can successfully pass the exam on your first attempt and launch a rewarding career in securities.

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