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November 1, 1998

Equity Traders Are Slow to Sit for the Series 55 Exam

By Michael L. O'Reilly

In the first four months of testing, roughly 650 individuals took the new National Association of Securities Dealers' exam for Nasdaq and over-the-counter traders. Of those 650, almost 25 percent or 150 people failed.

All Nasdaq and OTC traders are required to take the test the Limited Representative-Equity Trader Examination, or Series 55.

A two-year grace period was granted to 17,000 traders to pass the examination. The grace period ends May 1, 2000.

John Pinto, a former executive vice president of member regulation at NASD Regulation, the NASD's regulatory arm, said the passing rate for the Series 55 75.5 percent is consistent with the early rate for new NASD exams introduced in the past.

Pinto, however, expressed concern that only 650 examinations were proctored through September.

"That's a very low number," Pinto said. "People think they have a lot of time to take the test. But we're almost six months into the two-year grace period, and 650 is a very low number. I think that's an area of concern for firms."

The examination numbers were confirmed by NASD Regulation.

The Series 55 was prepared by the NASD in 1997, and all traders were given the opportunity to file for the grace period before its August 31 deadline.

According to NASD Regulation, 80 percent of those required to take the Series 55 filed for the extension before the August 31 deadline.

But Pinto said of those 17,000 professionals filing for the grace period, as many as 3,000 will not sit for the Series 55. "A lot of firms filed for extensions for people who won't have to take the exam," he said. "Compliance people. Managers. Some firms were just playing it safe."

Pinto currently heads the Washington branch of Dover International, an Atlanta-based consulting firm. A Dover subsidiary, the Investment Training Institute (ITI), is offering a course and study guide for the Series 55.

Pinto said professionals taking the ITI course which is endorsed by the Security Traders Association have a Series 55 passing rate of 85 percent. He recommends professionals spend at least 25 hours studying for the examination.