Series 39

The Series 39 exam is offered by the Financial Industry Regulatory Authority (FINRA) and tests a person's knowledge of how to perform the functions of a direct participation program (DPP) principal.

Series 39 licensees may sell a number of common DPPs, which are pooled entities that give investors access to a business’ cash flow and tax benefits. Common examples of DPPs that may be sold are oil and gas limited partnerships (LPs), real estate partnerships and S corporations, which can have immense tax advantages such as flow-through income. These structures are set up as corporations, but income flows through to shareholders directly without being taxed. (Note: Investors in these securities should be in constant consultation with their tax advisors to ensure that they comply with IRS restrictions and filing requirements.)

The information tested on the Series 39 exam, also known as the direct participation program limited registered principal qualification exam, includes the rules and statutory provisions that are applicable to the supervisory management of a broker dealer that limits its products to DPPs. Candidate must prove their knowledge of how to manage registered representatives within a broker/dealer, and the regulatory and fiduciary requirements of the FINRA and the Securities and Exchange Commission (SEC). The range of topics covered by the Series 39 exam include:

• Structure and regulation of DPP offerings.
• Sales supervision
• General supervision of employees
• Regulatory framework of FINRA
• Compliance with financial responsibility rules

The exam consists of 100 multiple-choice test questions. Candidates have two hours and fifteen minutes to complete the exam and must do so with a passing score of 70% in order to become licensed.

Before taking the Series 39 exam, candidates must have pass two prerequisite exams: the Series 7, which assesses candidate ability to perform as a general securities representative, and Series 22, which assesses candidate ability to perform as a DPP representative.

Once a candidate has passed the Series 39 exam, qualified individuals can become principals at broker/dealers that deal in or market DPPs, which are typically set up as limited partnerships. Individuals can take on a supervisory or sales role that includes regulatory compliance over direct participation program limited partnerships, limited liability companies and S corporations.

The Series 39 also qualifies individuals to take on the overall supervision of their firm’s investment banking and securities business, which includes compliance, trading, underwriting, market making and advertising for the activities covered by the supervisory principal’s license.