The Securities and Exchange Commission has approved a Financial Industry Regulatory Authority proposal that makes major changes in the securities licensing and exam system.

On Friday, the SEC approved the plan to create a two-tier examination system, allow more flexibility in obtaining and maintaining licenses and phase out a number of outdated exams and licenses.

The update will create a “securities industry essentials” (SIE) exam, which is an entry-level test covering industry basics. “Top-off” exams would then be required for specific securities and principal licenses.

Individuals taking the SIE exam would not need to be associated with a broker-dealer. However, to engage in the securities business, an affiliation with a B-D and a full license will be needed.

Finra is also expanding the use of “permissive” registrations, which allow people to obtain and keep a license even when they don’t perform the specific role covered by the registration.

The objective of the revamp is to eliminate redundancies in the various licensing exams, encourage more new entrants into the industry and develop existing talent and enhance career opportunities.

The changes were broadly supported by the securities industry.

State regulators, however, objected to expansion of the permissive registrations. They worried that this provision would let unqualified individuals park licenses.

But Finra countered that its current rules allow firms to permissively register people who perform legal, compliance, internal audit and back-office responsibilities, and by extending this flexibility to employees in technology, accounting and other areas the industry will be able to build a deeper pool of talent.

Besides, Finra argued in a letter to the SEC last month, registrations are “not a substitute for experience.” Under the current rules, for example, an individual with no prior experience can pass the Series 7 and Series 24 examinations and “function as a principal immediately,” Finra said.

Finra plans an implementation date in the fourth quarter of 2018. The actual date will be announced in a future regulatory notice.