Securities Industry Essentials (SIE) ExamOverview of Regulatory FrameworkHard
A broker-dealer firm is onboarding a new employee who previously had their securities license revoked by another SRO for serious misconduct involving customer funds. The firm is aware of this disciplinary history and is considering whether to hire the individual. According to FINRA rules, what is the most likely outcome regarding this individual's ability to become a registered person with the firm?
- AThe individual can be registered if the firm provides enhanced supervision.
- BThe individual can be registered, but only in a non-customer-facing role.
- CThe individual can be registered immediately after completing a new Series 7 exam.
- DThe individual is subject to statutory disqualification and cannot be registered without a waiver.
Show answer & explanationAnswer & explanation
Correct answer: D. The individual is subject to statutory disqualification and cannot be registered without a waiver.
Revocation of a securities license by any SRO for serious misconduct, especially involving customer funds, is a statutory disqualification. This means the individual cannot be registered with a FINRA member firm unless FINRA grants a waiver, which is rare and requires a compelling case.
Why the other options are wrong
- A. Enhanced supervision is not sufficient to overcome statutory disqualification without a waiver from FINRA.
- B. Statutory disqualification generally prevents any registration, regardless of the role, without a waiver.
- C. Passing a new exam does not cure a statutory disqualification; the underlying disciplinary action is the impediment.
Statutory Disqualification
Statutory disqualification is a legal prohibition that prevents an individual from becoming or remaining registered with a FINRA member firm due to certain serious disciplinary events, such as securities-related felony convictions, license revocations, or expulsions from other SROs.
- Prevents FINRA registration
- Triggered by specific serious misconduct (felonies, revocations)
- Requires a FINRA waiver to overcome (rare)
- Designed to protect the public
Memory trick: Serious 'S'in 'S'tops 'S'ecurities 'S'ervice.