WASHINGTON - Municipal advisor principals will soon need to take and pass a new exam under development by the Municipal Securities Rulemaking Board.
The Securities and Exchange Commission approved the MSRB’s proposal to amend its Rule G-3 on professional qualification requirements to require that MA principals pass the new Series 54 test on top of the existing Series 50 test that all muni advisors have to pass. The ability of muni advisors to qualify as principals is important because the MSRB’s supervision rule requires that at least one person at a firm be designated a principal and be responsible for supervising the firm’s other professionals.
The rule change becomes effective on Dec. 20 following the SEC's Nov. 20 approval. The MSRB will have a pilot Series 54 exam from February 2019 through June 2019, from which the board will establish a passing score for the test. Any MA principal may take the pilot exam during the pilot period. Those who achieve the passing score or better will be considered qualified as a principal when the MSRB permanently establishes the Series 54 in the fall of 2019.
At that time, other MA principals will have a one-year grace period to take and pass the examination. The rule allows an MA to function as a principal for 120 calendar days without being qualified with the Series 54 examination.
The MSRB said in a notice that “in the coming weeks” it will file for SEC approval of a content outline for the test. The outline will describe the topics on the examination, the percentage of the exam devoted to each topic area, and the number of questions that will appear on the test.
Larry Kleeman, an attorney and muni advisor at Ranson Financial Group in Wichita, Kan., said he was confident his firm would have two individuals qualify as principals but that a one-year grace period was good to have. Kleeman said he further appreciated that the pilot exam is essentially a free run and that failing it wouldn’t count against a firm.
“We’re looking forward to seeing the content outline in the coming weeks,” Kleeman said. “However, if it’s anything like the Series 50 pilot process, I’m expecting the outline to be very general in nature and no substitute for a thorough study guide that will eventually be developed by third parties.”
The MSRB is not grandfathering individuals who have previously served as principals or passed other professional exams to earn certifications such as Chartered Financial Analyst or Certified Financial Planner.
