Understanding the Series 7 Exam
If you're looking to become a stockbroker in the United States, you need to pass the Series 7 exam to get licensed. This exam, administered by FINRA, qualifies you to sell a wide range of securities products, but it excludes commodities and futures. It tests your knowledge on investment risks, taxation, and various financial instruments.
Formally called the General Securities Representative Qualification Examination, the Series 7 is all about ensuring you have the basics down for working in the securities industry. It covers topics like investment risk, taxation, equity and debt instruments, packaged securities, options, retirement plans, and how to interact with clients.
Purpose and Key Takeaways
The main purpose of the Series 7 license is to establish a baseline competency for registered representatives or stockbrokers in the securities industry. It's an essential requirement if you're starting out as a broker, and the exam dives into a broad range of financial terms, topics, and securities regulations.
Here's what you should remember: The Series 7 entitles you to sell all types of securities except commodities and futures. It covers investment risk, taxation, equity and debt instruments, packaged securities, options, and retirement plans. Once you pass, you can trade things like stocks, mutual funds, options, municipal securities, and variable contracts—but not real estate or life insurance. Also, many states require you to pass the Series 63 exam on top of this.
Requirements for the Series 7
Since October 1, 2018, if you want the General Securities registration, you have to pass both the Securities Industry Essentials (SIE) exam and the Series 7 exam. The SIE is an introductory test that checks your knowledge of basic securities industry info, like product types and risks, market structures, regulatory agencies, and prohibited practices. You can find more details in FINRA's SIE exam content outline.
To take the Series 7, you must be sponsored by a FINRA member firm or another applicable self-regulatory organization. That firm files a Form U4 for you to register for the exam. If you're not with a FINRA member, use the Test Enrollment Services System (TESS) to sign up. FINRA oversees all this to make sure anyone selling securities is qualified and tested.
Exam Structure and Details
The Series 7 exam is structured around key functions: It includes 9 questions on seeking business for the broker-dealer from customers and potential customers, 11 on opening accounts after evaluating customers’ financial profiles and investment objectives, 91 on providing information about investments, making suitable recommendations, transferring assets, and maintaining records, and 14 on obtaining and verifying customers’ purchase and sales instructions, processing, completing, and confirming transactions.
Exam Logistics
- The exam has 125 multiple-choice questions and lasts 225 minutes.
- It costs $300, and you need a 72% to pass.
- Before October 1, 2018, it had 250 questions, lasted six hours, cost $305, and had no prerequisites.
- FINRA doesn't give you a physical certificate; employers check your completion through the Central Registration Depository (CRD).
- Passing the Series 7 is a prerequisite for other licenses, like the Series 24, which lets you supervise broker activities.
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