Executive Summary

The Securities and Exchange Commission recently approved a new NASD^® qualification examination that may be used to qualify registered representatives for options. The Registered Options Limited Representative (Series 42) is available immediately. This test supplants the Put and Call Questionnaire administered by Senior Registered Options Principals for NASD equity option qualification purposes, and provides an alternative to the Interest Rate Options Examination (Series 5) and the Foreign Currency Options Examination (Series 15) for NASD qualification purposes.

Background

Until this time, the NASD primary qualification examination for options was the General Securities Representative Examination (Series 7). In keeping with its alternative modular representative qualification program, the NASD will now offer the Registered Options Limited Representative Examination (Series 42) as well. Because this is solely an options test, registration as a registered options representative under Section 2(d) in Part III of Schedule C to the NASD By-Laws will require a concurrent registration as a Corporate Securities Limited Representative (Series 62). The Series 62 co-requisite is necessary to demonstrate functional understanding of the securities products underlying the option contracts. The Series 42 examination contains 50 questions with 90 minutes of testing time allowed for its completion. A candidate must answer a minimum of 35 questions correctly (70 percent) for a passing grade.

Questions on handling option accounts, equity, debt, foreign currency, and index options are on each test. Application for registration is made on Form U-4. The fee for the exam is $60. Study outlines may be ordered for $4 each by mailing payment and request to NASD MediaSource^SM, PO Box 9403, Gaithersburg, MD 20898-9403; or by credit card by calling (301) 590-6578.

Qualification Requirements

With the availability of the Series 42 examination, the NASD will no longer recognize the Put and Call Questionnaire as continuing to satisfy equity option qualification requirements for NASD representatives. The Put and Call Questionnaire has been administered by Senior Registered Options Principals at member firms. The Series 42 examination will now be required. This requirement, with respect to equity options, only applies to those representatives who qualified as General Securities Representatives before May 1977, have not yet taken the Put and Call Questionnaire, but who now wish to conduct an equity options business. The Interest Rate Options Examination (Series 5) and the Foreign Currency Options Examination (Series 15), however, remain viable qualifying examinations for those option products and alternatives to the Series 42 for NASD qualification purposes. Foreign currency and debt options have been covered on Series 7 since June 1986.

The Series 42 is the last of four NASD and one Municipal Securities Rulemaking Board (MSRB) limited representative examinations to become effective. The following five examinations, when completed as a group, will now convey NASD General Securities Representative status:

• Investment Companies and Variable Contracts Limited Representative Examination (Series 6)
  
  
• Direct Participation Programs Limited Representative Examination (Series 22)
  
  
• Registered Options Limited Representative Examination (Series 42)
  
  
• MSRB Municipal Securities Representative Examination (Series 52)
  
  
• Corporate Securities Limited Representative Examination (Series 62)

Using the Series 7 examination or combining these five modular examinations now offers members more flexibility in satisfying NASD registration requirements.

Questions regarding this Notice should be directed to David Frandina, Qualifications Analyst, NASD Qualifications and Exams, at (301) 208-2787.