The Series 86/87 Exams: Understanding, Functions, and Prerequisites
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Summary:
The Series 86/87 exams serve as crucial benchmarks for aspiring financial research analysts, evaluating their proficiency in critical aspects such as financial metrics, earnings modeling, ethics, and industry dynamics. Administered by FINRA, these exams are prerequisites for obtaining the research analyst designation, enabling professionals to produce substantive reports guiding investment decisions. Delve into the comprehensive exploration of series 86/87, covering exam structures, key functions, prerequisites, exemptions, and practical insights for individuals in the finance industry.
Understanding the series 86/87 exams
The financial industry, guided by principles of fairness and ethical conduct, necessitates stringent certification processes to safeguard investor interests. The series 86/87 exams stand as pivotal requirements for individuals aspiring to become research analysts, a role that involves crafting insightful investment reports. These reports, distributed to sales staff, institutional investors, and broker/dealer clients, play a decisive role in shaping investment decisions.
Commonly referred to as the research analyst exam, candidates must possess in-depth knowledge of diverse domains, including company and industry analysis methods, management study, and a profound understanding of supply and demand dynamics within specific industries or sectors. Mastery of financial metrics, earnings modeling, and industry dynamics is critical for producing accurate and valuable financial reports.
Key functions of series 86
Series 86 (part I) focuses on information and data collection (function 1) and analysis, modeling, and valuation (function 2). The exam, comprising 100 multiple-choice questions and 10 pretest questions, challenges candidates over four-and-a-half hours. A passing score of 73% or better is mandatory for progressing in their careers.
Key functions of series 87
Series 87 (part II) delves into regulatory administration and best practices, particularly in the preparation of research reports (function 3) and dissemination of information (function 4). The section comprises 50 questions and five pretest questions, demanding candidates to demonstrate their understanding of rules and ethics within a time frame of one hour and 45 minutes. A passing score of 74% or better is the threshold for success.
series 86/87 prerequisites and exemptions
Attaining the research analyst designation involves not only passing the series 86/87 exams but also the Securities Industry Essentials (SIE) exam. SIE evaluates professionals’ foundational knowledge about securities, covering product types, risk, regulation, and prohibited activities.
Professionals who have successfully completed both Level I and Level II of the Chartered Financial Analyst (CFA) Exam or Chartered Market Technician (CMT) Certification Examination may request exemption from the series 86 portion. For others, a prerequisite test—Series 7, Series 17, Series 37, or Series 38—is mandatory before attempting the series 86/87 exams.
Key questions
Addressing the specifics of the series 86/87 exams, FINRA’s website outlines key questions candidates can expect. These include inquiries about the registration and qualification requirements for supervisors of registered research analysts, the mandatory registration and series 86/87 passing for sell-side equity analysts, and the applicability of NASD 1050 to individuals working in equity research.
Frequently asked questions
What topics does the series 86 exam cover?
The series 86 exam focuses on information and data collection, analysis, modeling, and valuation within the financial research analyst domain.
Is the series 86/87 exam open book?
No, both series 86 and series 87 exams are closed book, meaning candidates cannot bring any reference materials.
What is the passing score for the series 87 exam?
A passing score for the series 87 exam is 74% or better, evaluating candidates on regulatory administration, research report preparation, and information dissemination.
Key takeaways
- Series 86/87 exams are vital for research analysts, covering financial metrics, earnings modeling, ethics, and industry dynamics.
- Successful candidates can produce reports influencing investment decisions.
- The exams consist of two parts: series 86 and series 87, focusing on different aspects of research analysis.
- Passing the Securities Industry Essentials (SIE) exam is a prerequisite for obtaining the research analyst designation.
- Candidates may be exempt from the series 86 portion based on completion of certain professional exams.
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