It’s often said that the only way to remove fraud entirely from the financial industry would be to demand pure transparency at all times. Of course, this is something that is only possible in theory. After all, companies need to keep their business secrets if they want to maintain a competitive edge. However, there are still those who believe transparency is the key to avoiding corruption in international finance. Robert Cook, the new head of FINRA, is one of those individuals. Cook recently brought up a popular suggestion, supported by many within the financial industry, that the organization provide a summary of findings for exam results.
This is important, as it’s the first time results for the exams will be publicly available. The goal is to make the exam process more transparent by showing firms where their deficiencies lay. Firms can then offer remedial training when needed, and view their progress through future exam scores. Another way to monitor this could be to complete regular assessments verified via Remote Risk Assessment.
What FINRA Exam Results Will Tell You
FINRA manages the qualification standards required to work in securities or commodities. The list of exams FINRA offers is extensive, but some of the more common tests include:
- Series 3 – National Commodities Futures Examination – This is a specialized exam for those who want to buy and sell commodities like fuel, agriculture-related products, or precious metals.
- Series 6 – Investment Company and Variable Contracts Products Representative Examination – This one is mainly based on the trading of mutual funds and variable insurance contracts, rather than the trading of individual securities.
- Series 7 – General Securities Representative Examination – This is an entry level examination and the first step most traders will take. The Series 7 allows for the trading of several categories of securities, variable annuities, direct participation, and options trading
- Series 24 – General Securities Principal Examination – This is a management level exam that allows a licensed broker to supervise other licensed brokers.
- Series 79 – Investment Banking Representative Qualification Examination – This is a specialized exam for advising on and facilitating debt and potential stock offerings. It’s the opposite end of the investment process in that this person is the one who helps the company secure funds by offering equity to public or private investors.
These exams require firm sponsorship, so firms have to have a lot of faith in the people they’re sending to be tested. In the past, this was done on a pass/fail basis. While firms would know who was able to trade, they wouldn’t know specific areas of the tests where the candidate may be weak.
The summaries that Cook is suggesting will allow firms to get an idea of what sections of the tests their candidates need to work on. They can also use the results to track trends in their workforce that will show areas of opportunity for training. Cook suggested the idea after taking a “walking tour” of many financial firms, who stated this would be a powerful tool. Of course, it’s going to take a while to implement. In the meantime, companies may consider doing their own test refresher program and use RRA as a step for verification.
Using RRA as an Assessment Tool
Having access to FINRA results may help firms with new individuals, but what about when firms want to test existing representatives or have them expand their capabilities? Doing pretests is often the best option for managing this, but these tests can be expensive, especially when done in a proctored environment.
You can have employees take these assessments on their own time, using a computer-based system. While this is much more cost effective, the problem is it’s not as accurate. When in a non-proctored environment, the likelihood that people will use outside resources increases. In fact, in one study, almost 20% of graduate students admitted to cheating on tests, while 43% cheated on take home assignments. The issue with doing at-home tests is obvious. While they may be cost effective, they lack integrity.
That’s why RRA can be a valuable verification tool in test taking. Here’s how it works:
- The individual would receive notice that they are not allowed to use any outside resources when taking the at home test.
- They would be given instructions to use a call-in center to complete a verification of this following the test.
- The individual takes the test.
- They call the RRA center, where they verify that they took the test themselves and didn’t use outside resources.
- The risk assessment technology would then analyze the individual’s answers, looking for key signals and indicators of deception risk.
- The employer can then use the report to verify or disqualify the results of the test.
RRA can be a valuable tool in making pre-tests for FINRA exams more cost effective, while keeping candidates honest. While FINRA may publish exam results in the future, it’s still necessary to do your own in-house tests to keep your staff performing at the highest level.
AC Global Risk offers RRA as a tool for exam verifications, as well as for a wide range of other uses. This is a simple step that can be completed in under ten minutes, in any language and at any location. For more information, contact us.
Lead Image Source | Flickr user Ryan McGilchrist