What Is Series 53 - Municipal Securities Principals Exam?

The Series 53 exam, also known as the Municipal Securities Principals Exam, is a securities license exam administered by the Financial Industry Regulatory Authority (FINRA) that tests an individual’s knowledge of basic securities products and investment banking principles.

The Series 53 exam is required for anyone who wants to sell and trade securities products, such as stocks, bonds, and mutual funds. Series 53 is also required for anyone who wants to buy and sell municipal securities.

Who Must Take the Series 53 Exam?

The Series 53 license is typically required of:

– Individuals who work in a financial services firm and supervise other securities brokers and investment advisors

– Individuals who manage portfolios for clients or institutions

– Individuals who sell or trade securities products, including stocks, bonds, and mutual funds

– Individuals who underwrite new issues of municipal securities

Eligibility

Individuals must meet the following eligibility requirements in order to take the Series 53 exam:

– Be at least 18 years of age

– Have a Social Security number

– Have a valid email address

– Have a U.S. residential address

– Have a FINRA member firm sponsor you for the exam

However, individuals who have a Series 63 or Series 66 license do not need a sponsoring firm in order to take the Series 53 exam.

Exam Coverage

The Series 53 Exam is a three hours and thirty minutes exam consisting of 100 multiple-choice questions. The exam covers six topics:

Federal Regulations (4 questions)

Understanding the regulatory environment in which the municipal securities industry operates is critical for anyone working in this market.

This section includes questions on topics such as the role of the SEC, FINRA, MSRB, and DTC in the municipal securities market, and the regulation of municipal securities products.

General Supervision (23 questions)

Responsibilities and general supervision of individuals licensed in the municipal securities industry are covered extensively in this section of the Series 53 exam.

This includes questions on topics such as recordkeeping and trade allocation requirements for broker-dealers, suitability obligations for advisors, and suitability obligations for dealers.

Sales Supervision (25 questions)

Supervision in the municipal securities industry is essential to protecting investors.

This section covers topics in sales supervision, including questions on what FINRA rules govern the supervision of registered individuals who are not employees, rules governing floor brokers and outside business activities, advertising guidelines for broker-dealers, how FINRA enforces its own rules, etc.

Origination and Syndication (23 questions)

Understanding a dealer’s obligations when originating and syndicating securities is critical for anyone working in the municipal securities market.

This section includes questions on topics such as how to price securities, what constitutes fair dealing, due diligence requirements for underwriters, and restrictions on insider trading.

Trading (10 questions)

The Series 53 exam covers a broad range of topics related to trading municipal securities, including questions on how the SEC treats debt issuances and debt repurchases.

Operations (15 questions)

Understanding what is needed to effectively operate a municipal securities business is important for anyone seeking to work in this field.

This section includes questions on topics such as the process of placing an order with a broker-dealer, how to trade options and futures contracts, and what constitutes a valid trade.

Sample Questions on the Series 53 Exam

Here are a few examples of questions that could appear on the Series 53 Exam:

1) What is the role of the SEC in regulating the municipal securities market?

  1. A) The SEC is responsible for registering broker-dealers and investment advisors who work in the municipal securities market.
  2. B) The SEC oversees the disclosure of information by issuers of municipal securities.
  3. C) The SEC enforces rules that govern the activities of participants in the municipal securities market.
  4. D) The SEC has no role in regulating the activities of participants in the municipal securities market.

Answer: B

2) If a municipal securities broker-dealer is not responding to customer complaints, what agency may the MSRB refer such complaints to?

  1. A) The SEC
  2. B) FINRA
  3. C) The Federal Bureau of Investigation (FBI)
  4. D) The Consumer Financial Protection Bureau (CFPB)

Answer: A

3) Which of the following would constitute trade for purposes of FINRA’s suitability rule?

  1. A) Purchasing municipal bonds for a customer.
  2. B) Purchasing municipal bonds from a registered representative who has no position in the securities at that time.
  3. C) Selling municipal bonds from a position held overnight to another firm after holding the same securities overnight.
  4. D) Selling municipal bonds held overnight to another firm after holding the same securities overnight.

Answer: B

Passing Score

To pass the Series 53 exam, you must answer at least 70 of the 100 questions correctly.

Cost of Taking the Exam

As of 2021, the price is expected to be $245. This fee includes the cost of registration, as well as one free retake.

Tips for Passing Series 53 Exam

The following are some tips that may be helpful when taking the Series 53 Exam.

1) Take practice exams. As with any test, practicing can help improve your chances of passing. The more familiar you are with the material, the better you will perform on exam day.

2) Get plenty of rest the night before. A well-rested mind is a focused mind.

3) Read all of the answer choices before selecting your answer. If you are not sure which choice is correct, eliminate any that you know are incorrect first, then select the one that remains.

Remember, each answer has justifications for why it is correct, so be sure to read these carefully.

4) You can skip questions and come back to them later. If you are unsure of an answer, mark it for review and move on. You will not lose points for incorrect answers, but you will lose points for unanswered questions.

5) Take your time. There is no penalty for guessing or leaving questions blank, so do not feel that you have to rush through the exam.

6) Stay calm and positive. Remember that you have prepared for this exam and you are likely to do well if you remain focused.

If you follow these tips, you should be able to pass the Series 53 Exam with ease.

The Bottom Line

The Series 53 exam tests the knowledge needed to effectively operate a municipal securities business.

Even though this exam is not mandated by any government agency, it is designed to ensure that those who work in the industry possess an adequate level of knowledge regarding topics such as accepting orders and executing trades.

Taking practice exams can help you perform your best on test days, so consider using them when studying.

The Series 53 exam is a licensing test for firms employed in the municipal securities business. It provides a uniform standard for the industry by testing knowledge of regulatory requirements; it also ensures that those who work in this sector know the limits of their abilities and conduct themselves accordingly.
Anyone working for a registered broker-dealer must pass the Series 53 exam to qualify for employment.
The Series 53 exam covers topics such as business operations, rules and regulations, practices, transactions, taxes, and fees.
As of 2021, there are 100 multiple choice questions on the exam.
The passing score for the Series 53 exam is 70 of 100 questions correctly answered.

True Tamplin, BSc, CEPF®

About the Author
True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, or check out his speaker profile on the CFA Institute website.