Research Analyst Qualification Exam
The Series 86/87 exam qualifies individuals to function as research analysts at FINRA member firms. It is a two-part exam: Part I (Series 86) covers analysis, valuation, and forecasting skills, while Part II (Series 87) covers regulatory requirements and report dissemination. Research analysts must demonstrate expertise in collecting financial data, performing fundamental analysis, building valuation models, preparing research reports, and complying with conflict-of-interest rules. This exam requires the SIE, Series 7, and firm sponsorship.
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Practice Questions
Test your knowledge with these Series 86/87-style questions. Click an answer to check if you are correct.
1. Which SEC filing contains audited annual financial statements and the Management Discussion and Analysis (MD&A)?
Correct: A. The 10-K is the annual report filed with the SEC containing audited financial statements and MD&A. The 10-Q contains quarterly (unaudited) financials, the 8-K reports material events, and the DEF 14A is the proxy statement disclosing executive compensation and board matters.
2. In a DuPont analysis, ROE is decomposed into which three components?
Correct: B. The DuPont formula decomposes ROE into profit margin (net income/revenue) x asset turnover (revenue/total assets) x equity multiplier (total assets/equity). This framework helps analysts identify whether returns are driven by operational efficiency, asset utilization, or financial leverage.
3. Regulation FD requires that when a public company discloses material nonpublic information to an analyst, it must:
Correct: B. Regulation FD requires simultaneous public disclosure when material nonpublic information is intentionally shared with select individuals like analysts. If the disclosure is unintentional, the company must make public disclosure promptly -- within 24 hours or by the next market opening.
4. Enterprise Value is calculated as market capitalization plus:
Correct: B. Enterprise Value = Market Cap + Total Debt + Preferred Stock + Minority Interest - Cash and Cash Equivalents. EV represents the total value of the firm to all capital providers and is used with enterprise-level metrics like EBITDA for capital-structure-neutral comparisons.
5. Under FINRA Rule 2241, research reports must disclose all of the following EXCEPT:
Correct: C. FINRA Rule 2241 requires disclosure of analyst ownership, investment banking relationships, and rating distribution, but does not require a 5-year personal trading history. The rule focuses on current conflicts of interest that could bias the analyst's recommendation.
Related Exams
These exams are prerequisites or commonly pursued alongside the Series 86/87.
General Securities Representative
A prerequisite for the Series 86/87. Qualifies you to sell a broad range of securities products and provides the foundation for research analyst work.
Investment Banking Representative
Covers investment banking activities including underwriting and M&A advisory. Shares analytical overlap with research analyst skills.