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Brokers who fail exam more likely to face disciplinary action

Discipline

More than 51,500 stockbrokers have – at least once – failed the Series 63 exam, a basic test which qualifies candidates as securities agents. And – perhaps of more concern – these brokers are more likely to be met with disciplinary actions in their careers, according to a review by The Wall Street Journal.

In fact, the more times a broker failed the test, the higher number of disciplinary actions they will see – such as criminal charges and firings, The Journal reported. The brokers who failed the test more than twice were 77% more likely to report a felony or financial-related misdemeanor than brokers who passed the exam on the first try.

Such information is not given to investors, but the Financial Industry Regulatory Authority (Finra) may review the findings. A Finra website, called BrokerCheck, currently shows only when brokers passed exams.

When it comes to the Series 63 exams, about 14% of brokers failed the test at least once. Some 3,024 brokers failed the test at least three times.

Regulators allow an unlimited number of tries to pass the Series 7 and Series 63 exams, although trainees must wait six months to retake the test after three successive failing scores. The passing grade is 72%. Yet, Morgan Stanley trainees need to pass the Series 7 exam on their first try add pass the Series 63 exam in no more than two tries, or “face termination of their employment,” a firm spokesman told The Journal.

The news comes on the heels of another report which showed that more than 1,600 stockbrokers have bankruptcies or criminal charges in their past that were not reported to regulators – or to investors. Finra requires brokers and the firms that employ them to report bankruptcies and criminal charges.

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Buzz Around the Office

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A dog that gained notoriety after racing a New York commuter train has been adopted by a family.

Known as “Tie,” the shepherd-collie mix captured the interest of about 100 would-be owners. Dozens of them applied to adopt the dog. She was called Tie because of all the ties she ran across along the Metro-North Railroad tracks, and then walked into the arms of police officers in Manhattan.

Quote of the Day

“Everyone has the brainpower to follow the stock market. If you made it through fifth-grade math, you can do it.”

–     Peter Lynch

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