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Series 3 License Frequently asked questions / FAQs
There are a variety of reason why candidates seek to become a series 3 licensed. Some are entering the futures industry and are just starting out in a new career. Others are coming from established financial services firms and are seeking to expand their product offerings to their clients. A series 3 license will also be required if a candidate wants to recommend certain managed account platforms to clients. Many managed accounts use futures to gain exposure to the markets and as such agents will need to obtain a series 3 license. If you are joining an NFA member organization your employer as a condition of employment or promotion, will require you to obtain the series 3 license to function in your new job. Your firm’s compliance department, home office or HR will notify individuals directly or through your manager as to the time frame for taking the exam
A series 3 license will allow you to register as an associated person of an NFA member firm. As a series 3 licensed professional you will be able to transact business in a large number of futures contracts as well as in options on futures contracts. After passing the series 3 exam you may trade commodity futures contracts on commodities such as oil and gas, agricultural products such as wheat and corn, financial futures on the S & P 500, currencies and Treasury securities. These are just some of the contracts you will be licensed to trade and recommend to clients. Being licensed as an associate person of an NFA member firm will allow you to earn commissions for executing orders for clients in a wide variety of commodity contracts.
The series 3 exam is a challenging exam. The information tested covers complex topics relating to market and product knowledge. In order to pass the exam you must demonstrate that you have a comprehensive understanding of how futures markets work and the relationships between the contracts and the underlying physical commodities. Mastering this information will go a long way to help you pass the series 3 exam. However, this alone will not be enough as the series 3 also requires you to have detailed knowledge relating to industry rules and regulations. You will need to have a good grasp of all of the regulatory matters, down to the smallest detail. The series 3 exam is one of the only exams that requires you to pass both portions of the exam. Acing one section alone will not get you passed the exam if you bomb the other section. You must pass both the general knowledge and regulatory sections. Passing the series 3 exam is a significant challenge and obtaining a series 3 license takes focus and dedication to the exam preparation process. Students should not take this test lightly. You must thoroughly prepare to take the exam and should make it a top priority. The series 3 exam covers areas many people are never exposed to in their careers. Many people who take the series 3 exam are not actively involved in the commodities markets. As such, many have never had any experience dealing with the mechanics of futures and complex spreads . These two areas are heavily tested on the exam. You should prepare for the exam by reading a textbook completely with a highlighter. You must read the book, there are no shortcuts and students need to understand this. You must clear your schedule, shut off your phone and focus. In addition to obtaining the knowledge required by the exam, you must master the application of the information by taking as many practice questions as you can. We recommend at least 60 – 70 hours of preparation to ensure you pass your series 3 exam and become licensed as an associated person of an NFA member.
The answer is, that while it feels like your series 3 license is indeed transferable, in actuality it is not. If you want to change firms, your series 3 registration / license along with all of your other registrations must be terminated by your current FINRA and or NFA member firm. Your former employer / the firm that you are leaving will fill out and submit a Form U5 to FINRA, if you are working for a FINRA member firm. This will terminate your employment and your registration with that firm. When you arrive at your new firm you must fill out and submit a new Form U4. This will begin your registration with your new firm and your series 3 license will become active at your new firm upon receiving notice from FINRA and the states where you conduct business. If you are associated exclusively with an NFA or CFTC member firm, your firm will initiate and terminate individual registrations through the online registration system or ORS
Obtaining a series 3 license will require many people to make an investment in their professional development. Your series 3 license will qualify you as an associated person of an NFA member firm and allow you to transact business in commodities futures contracts and options. Many people who obtain a series 3 license enjoy lucrative and successful careers in the futures and financial services industry. The good news is, for those who absorb the costs, they are relatively low when compared to other types of training, certification and college expenses. Some employers pick up or reimburse the costs of training and the testing and registration fees. Even for these people many obtain additional resources such as additional test questions, books or videos to ensure they pass their exam and become licensed. For those who have to pay all of the expenses out of pocket, it usually only costs a few hundred dollars for the testing fees and quality training materials. . You will find that obtaining a series 3 license opens many doors for you throughout your career.
Once you have obtained your series 3 license you will be required to meet certain continuing educational requirements. Your firm will be required to provide you with periodic ethics training courses. NFA Rule 2-9 places a significant focus on the firm’s ongoing requirement to ensure that its employees receive continued and sufficient training covering ethical practices in the futures industry. Your employer must have written procedures detailing how it will meet its ethics training requirement. Your firm may have you attend a seminar, webinar or take an online course to satisfy the firm’s ethics training requirement
Your series 3 license is most likely the only license you will need if you plan on conducting business exclusively in futures. If you wish to transact business in securities you will be required to obtain a series 7 and 63 or series 7 and 66 if you have not already done so. We hope that this answers many of your frequently asked questions about the series 3 license. If you have any additional questions please call or email us.
This is easily one of the top questions we get asked here at the Securities Institute. Yet the answer isn’t as simple as you might think. First, everyone learns differently and we have long discovered that there simply isn’t an effective one size fits all approach when it comes to effective preparation for the Series 3 Exam. Every student is different and has to find the right mix of materials to meet their needs. However there are a few steps everyone can take to improve their odds and ensure they are doing everything they can to prepare for their exam.
First, always start with the textbook. Our Series 3 textbook is quite literally the foundation of our learning system. This book has everything you need to successfully pass the exam all laid out in a comprehensive, easy to follow format. Because of this we recommend that every client read the book completely and take notes of key points. This will ensure you know more than the basics, it will ensure you know the facts.
From there move to the practice tests. Take as many as you can and keep track of your results. The more you practice the more prepared you will be on test day and the higher your chances of passing the Series 3 Exam.
Passing the Series 3 Exam opens up a variety of career options. First, successful completion of this exam allows the individual to register as an associated person with an NFA member firm. Also, this exam allows the individual to trade in futures contracts as well as options on futures contracts.
Successful completion of the Series 3 Exam allows for application for NFA Membership in the following areas:
Passing the Series 3 Exam requires a minimum score of 70% on each of the two sections. You must pass both the General Knowledge and the Regulations sections to pass the series 3 exam.
At this point there are no prerequisites for the Series 3 Exam.
When you are ready to sit for the Series 3 Exam contact your firm’s principal to schedule a time. Testing centers are available in most geographies and the test is offered any time the center is open.
Please note: Candidates for the Series 3 Exam are NOT required to be sponsored by a FINRA member firm.
Good luck on your exam.
The Securities Institute of America, Inc