IA Exams Pass Rates Expected to Plummet
The North American Securities Administrators Association (“NASAA”) recently announced that the two central investment advisor exams (the Series 65 and the Series 66) will become even more difficult. Starting January 1, 2010 candidates will need to attain a score of 72% in order to pass the Series 65 exam and a 75% in order to pass the Series 66 exam. NASAA did not make any statements on its website or at its Annual Conference earlier this year about the change or the reason for the change.
I had a chance to talk with Chuck Lowenstein of Kaplan Financial Education about the announcement. “The exams have been oddities,” said Lowenstein, “everything else in the business requires a 70% to pass and the 65 had been kind of weird at 68.5% and the 66 as well at 71%. With these new numbers, NASAA has entered new territory. I suspect pass rates will plummet, unless they feel that the new exams will be so much easier (never happened in the past) that they need to bump up the minimum.”
Chuck went on to discuss the likely future performance for people taking the exams. “Based on our students’ performance, this will have a devastating effect on the overall pass rate. A significant percentage of exam takers pass with little room to spare and bumping the requirements by 4 or 5 questions on these exams (the 68.5% on the 65 was 89 correct – 72% is 93.6 questions so they’ll either round up to 94 or down to 93, that has not yet been disclosed) is going to catch many exam takers.”
We do not recommend that exam takers study any differently for the exam, but we urge all potential exam takers make sure they are adequately prepared. If an applicant does not pass the 65 or 66 on the first try, they will need to wait 30 days to take the exam again which will obviously have an effect on the timing of a hedge fund launch.
For more information please see NASAA’s post on the Series 65 and Series 66 exams.
Thank you to Chuck Lowenstein for bringing this issue to my attention.
Other related hedge fund law articles:
- Series 65 Exam
- Differences between the Series 65 and Series 66 Exam
- Overview of Hedge Fund Investment Advisors
Bart Mallon, Esq. of Cole-Frieman & Mallon LLP runs the Hedge Fund Law Blog. He can be reached directly at 415-868-5345.