The Series 7 Exam

The Series 7 exam, also known as the General Securities Representative Examination, is the central exam which brokers need to pass before accepting commissions from clients.  The exam allows brokers to engage in the following trasactions through the broker-dealer firm they are registered with: solicitation, purchase, and/or sale of all securities products, including corporate securities, municipal securities, municipal fund securities, options, direct participation programs, investment company products, and variable contracts.

In order to take the exam a person must be sponsored by a FINRA registered broker-dealer; some states used to sponsor the series 7 but I am not aware of any states which currently sponsor individuals for the exam. In order for a broker-dealer firm to register a person to take the exam, the broker-dealer will need to collect information on the person to fill out the Form U4 which will be submitted to FINRA through the CRD system.  The information that will be requested includes: prior addresses, prior securities industry affiliations, prior work history, among other items.

Overview of the Series 7 Exam

Questions: 260 multiple choice questions (10 questions do not count toward total)

Cost: $250 (usually paid by the sponsoring firm)

Time: 6 hours (two 3 hour sessions – bathroom breaks allowed; manadatory minimum 30 minute break between sessions)

Topic Areas: Prospecting for and Qualifying Customers, Evaluating Customer Needs and Objectives, Providing Customers with Investment Information and Making Suitable Recommendations, Handling Customer Accounts and Account Records, Understanding and Explaining the Securities Markets’ Organization and Participants to Customers, Processing Customer Orders and Transactions, Monitoring Economic and Financial Events, Performing Customer Portfolio Analysis and Making Suitable Recommendations

Passing score: 70%

Testing centers: Pearson or Prometric

Process to register: BD submits U4 through FINRA’s CRD system

Prerequisite: none

After the Series 7 Exam

It is often said that the perfect score on the Series 7 is 70% because that is the score where you studied just enough to pass.  I would not recommend studying just enough because I have heard of people who have not passed the exam.  If you do not pass you will be able to take the exam again.

If you do pass the Series 7 you will also need to pass the Series 63 in order to become a licensed broker in most states.  In addition you will need to submit fingerprint cards to your firm’s compliance officer who will then send them into FINRA for filing.  You should discuss this step with your firm’s compliance officer.  I have also included information on the Series 7 from the SEC below, you can also find the same information on the SEC’s site here.

Series 7 Examination

Individuals who want to enter the securities industry to sell any type of securities must take the Series 7 examination—formally known as the General Securities Representative Examination. Individuals who pass the Series 7 are eligible to register with all self-regulatory organizations to trade.

The Financial Industry Regulatory Authority (FINRA) administers the Series 7 examination. For more information, visit FINRA’s website where you can learn about the Series 7 exam and its qualification and registration process.

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