SFC Licensing Exams – Are Pass Rates Falling or is it Just a Summer Dip?

Overview

Based on monthly average pass rates reported for the year-to-date, the most challenging papers appear to be Papers 1 (Fundamentals of Securities and Futures Regulation: 52.0%) and 9 (Derivatives: 44.7%), however if we look at the summer month trend, Paper 6 (Regulation of Asset Management) is becoming trickier to pass.

For the first time this year, the Paper 1 pass rate fell below 50% in both June (48.5%) and July (49.3%) and the Paper 6 pass rates for June and July hovered just above 54% – the lowest Paper 6 pass rates for many years.  The pass rate for Paper 2 remained just below 69% for both June and July, while the pass rates for Papers 3 and 5 were around the 80% mark.

The pass rates for the practical papers in June and July revolved around the year-to-date averages:

Let’s have a look at some of the individual papers.

Paper 1 – Fundamentals of Securities and Futures Regulation

All figures year-to-date

The range of monthly pass rates has widened compared to 2018 (49.4% to 55.4%) with the average monthly pass rate dropping slightly.  The general trend in the Paper 1 pass rate in 2019 to date has been downwards.  Is this due to a higher proportion of relatively inexperienced graduates sitting the summer exams or are the examiners making the questions more difficult?  One to watch.

Paper 2 – Regulation of Securities

All figures year-to-date

The Paper 2 average monthly pass rate has hovered around 70% for the past few years, with one or two exceptions.  Concentrated study two weeks before the exam should get you through.

Paper 3 – Regulation of Derivatives

All figures year-to-date

Paper 3 is notable for the wide range of average monthly pass rates (almost 30%), which reflects small samples rather than exam difficulty.  The Paper 3 exam occurs once a month.

Paper 5 – Regulation of Corporate Finance

All figures year-to-date

The Paper 5 average monthly pass rate has dropped from 76.8% in 2018 to 71.7% in 2019 to date.  As the exam is only run once a month, small sample sizes give rise to high average score variability.

Paper 6 – Regulation of Asset Management

All figures year-to-date

Although the Paper 6 average monthly pass rate for the year-to-date is just shy of 70%, this masks the most recent pass rates for June and July, which were just over 54%.  Candidates have noted that these are the lowest Paper 6 pass rates for a number of years.  Were these two exams significantly more difficult than those of the past or just anomalies?  We are interested to see if the Paper 6 examiner is taking a tougher line.

Paper 7 – Financial Markets

All figures year-to-date

All Paper 7 average monthly pass rates have exceeded 60% in 2019 to date, which has not been the case for a number of years.  The range and standard deviation of the monthly averages reflect large sample sizes, as the exam is run eight times per month.

Paper 8 – Securities

All figures year-to-date

Paper 8, which is often taken in conjunction with Paper 7, has a wider range, higher standard deviation and lower pass rate than Paper 7.  As with Paper 7, it is run eight times per month, which suggests that candidates find Paper 8 marginally more difficult than Paper 7.

Paper 9 – Derivatives

All figures year-to-date

Paper 9 has always been the most difficult SFC licensing exam to pass, and 2019 is no exception.  The average monthly pass rate has not exceeded 50% for a number of years and it looks as if 2019 will be similar.  May’s average pass rate was 29.4% – dispiriting for many a Paper 9 candidate.

Paper 12 – Asset Management

All figures year-to-date

Paper 12 is run twice a month, giving a relatively small sample size, which goes some way to explain the wide range of average monthly pass rates and the relatively high standard deviation of 9.2%.  It is worthy to note that the average monthly pass rate of this technical paper has not dipped below 50% so far in 2019, unlike 2018.