The Series 7 License is one of the most prestigious in the financial services industry; it is also one of the most difficult. It allows license holders the most options when it comes to marketing and selling securities products, but it requires the most work to obtain.
The Series 7 Exam, also known as the Series 7 Top-Off is one of the most rigorous exams in the securities industry, but with proper preparation and industry knowledge, you will be prepared to pass on your first attempt.
What is the Series 7 License?
The Series 7 license allows licensees to work as a general securities representative. It is one of the main licensing exams that those new to the securities industry can take before beginning work. The Series 6 license is similar but does not cover as much information or allow license holders to work with as many securities-based products. Both exams are administered by the Financial Industry Regulatory Authority (FINRA).
Before taking your Series 7 exam, you will need to have passed FINRA’s prerequisite test, the Securities Industry Essentials (SIE) exam. You are also required to have a securities industry-related job and be sponsored by a firm or organization that is registered with FINRA to be able to take the exam.
What is on the Series 7 Exam?
The Series 7 has a total of 135 questions, 125 scored and 10 unscored. The unscored questions are dispersed throughout the test and not marked as unscored, so be sure to treat each question as if it is an important part of the exam.
Series 7 is one of the most comprehensive securities industry tests offered and passing it represents a major achievement. The test covers numerous securities products, job responsibilities, and regulations that licensees must follow. Because the Series 7 exam is an exhaustive test of so much within the securities industry, using a study course is very popular to prepare for the test.
Series 7 Exam Outline
There are four main sections on the Series 7 exam, which FINRA organizes by function, that you will be expected to do as a licensed general securities representative.
Function 1: Seeks Business for the Broker-Dealer from Customers and Potential Customers (9 questions)
Function 2: Opens Accounts After Obtaining and Evaluating Customers’ Financial Profile and Investment Objectives (11 questions)
Function 3: Provides Customers with Information About Investments, Makes Suitable Recommendations, Transfers Assets and Maintains Appropriate Records (91 questions)
Function 4: Obtains and Verifies Customers’ Purchase and Sales Instructions and Agreements; Processes, Completes and Confirms Transactions (14 questions)
The majority of the testable content comes from Function 3, providing customers with information about investments, making suitable recommendations, transferring assets, and maintaining appropriate records. This is largely due to the sheer volume of information that this function includes. FINRA publishes a lengthy content outline that includes everything type of product you can offer as a Series 7 license holder. These include:
- Equity securities
- Packaged products
- Debt securities
- Corporate bonds
- Municipal securities
- Registered hedge funds and fund of funds
- Asset-backed securities
- U.S. Treasury securities
- U.S. government agency securities
The Series 7 exam also requires that you understand the 269 testable rules and regulations that need to be followed as a licensed general securities representative. Many of the regulations come from the Securities and Exchange Commission (SEC), but rules from other regulatory authorities are tested as well. While a Series 7 license does not prepare you to be a tax professional, you still need to understand the basics of the tax code as it applies to securities.
The SEC regulations tested on the Series 7 test include sections from the Securities Act of 1933, the Securities Exchange Act of 1934, the Investment Company Act of 1940, and Regulations A, C, D, M, S-P, FD, ATS, SHO, and S.
You will also need to know and understand rules provided by:
- The Financial Industry Regulatory Authority (FINRA)
- Cboe Global Markets, Inc.
- Municipal Securities Rulemaking Board (MSRB)
- Trust Indenture Act of 1939
- Internal Revenue Code
- Employee Retirement Income Security Act of 1974 (ERISA)
- REIT Modernization Act of 1999
- New York Stock Exchange (NYSE) Rules
- Nasdaq Stock Market Rules
- Federal Reserve Regulations
There is a lot of testable information on the Series 7 exam, but with concentrated preparation, you will be able to pass the test and become licensed.
Day of the Test – Series 7 Requirements
On the day of your exam, you should plan to arrive at the testing center at least 30 minutes before your designated test time. You will check in with the exam proctor and be provided the procedures and policies before being allowed to begin your exam.
The test center will go over the procedure to use the restroom during your test, notify an exam monitor if your computer is malfunctioning during the exam, and items that you are allowed to bring with you. You will turn out your pockets and remove bulky jackets and coats to show that you are not bringing prohibited items into the test with you. You will be asked to provide a photo ID, have your photo taken, and sign with a provided pen.
The Series 7 test is taken on a computer, provided by the test center at a station in a separate testing room. You will lock your personal items, such as keys, cell phone, or purse, in a locker before being granted access to the testing room. Study materials are prohibited in the test center and best left at home or in your vehicle. FINRA takes any cheating very seriously and even accidentally bringing prohibited items into the testing room can result in your score being invalidated.
Tip:Only bring the essentials to your test–photo ID, keys, test registration. Leave everything else at home or locked in your personal vehicle.
You will have 3 hours and 45 minutes to complete the Series 7 exam. You are not penalized for guessing, so even if you do not know the answer to a question, you should make an attempt to answer it correctly. Once you complete the exam, you will be notified if you passed or failed right at your testing station. A passing score is simply designated as PASS. If you fail, you will be given a more detailed report to help you understand which areas to focus your studying on before retaking the exam.
What Is the Pass Rate of the Series 7?
With so many questions and information on the test, it must be very difficult to pass the Series 7 exam, right? While it is a difficult test, studying and preparing can go a long way to putting you on the road to Series 7 success.
Kaplan Financial, one of the industry leaders in professional exam prep, stated that the pass rate for all Series 7 exam-takers between October 2018 and March 2019 was 71%, data shared by FINRA at their 2019 annual conference. Since the new SIE exam became a prerequisite in 2018, the pass rate for the Series 7 increased slightly, but it still remains one of the most comprehensive exams that FINRA offers.
How Hard Is the Series 7 Exam?
At 125 scored questions and 10 additional unscored questions, the Series 7 exam is one of the longest that FINRA offers for securities industry professionals. It tests 269 rules and regulations, as well as their application to the professional functions that you will need to perform as a Series 7 license holder.
The Series 7 exam is considered one of the most challenging that FINRA administers, due to the broad base of information that is tested. It is one of the longest tests and covers the most material. As a reward for your hard work and expert-level knowledge, passing the Series 7 exam allows you to provide the greatest variety of securities-based products to customers. Your sponsoring firm may require that you document your Series 7 exam preparation to show that you are prepared for the challenging test.
Study Tips for the Series 7
Adequate preparation is essential to pass the Series 7 exam. You can learn a lot while working at your firm, company, or organization but you should still expect to study using a course, outline, or other materials and put in the time necessary to master the subjects.
Know What You Need to Know
FINRA provides a Series 7 exam content outline, which includes an exhaustive list of everything on the Series 7 test. Every securities product, rule, regulation, and code that is testable is included in the outline, as well as which of the four functions that it applies to within the test questions. You can go through each of the regulation documents yourself, but using a study course can be much more efficient.
Tip:The FINRA content outline breaks the test up into four sections. Breaking up your studying to match is a great approach to keep studying more manageable.
Use a Study Guide
When looking for a study guide or course, consider how you learn and what kind of time or format requirements work best for your current personal and professional obligations. You can find study guides and courses that offer everything from independently-paced courses to live online group study sessions.
You should look for a course that separates the content into more manageable study modules and has numerous practice test opportunities. If you are not comfortable taking a computer-based test, make sure that you allot time for multiple practice tests to increase your familiarity with the test’s format.
Study with a Group
Registering for the Series 7 exam requires that you be sponsored by a FINRA-member firm, company, or organization. Chances are that you have coworkers getting ready to work with securities and take the Series 7 exam, too. You can look within your professional network to see if others are studying for the Series 7 exam and work together. Create a study group to help clarify concepts, proctor practice tests, and keep each other accountable for study goals.
Passing the Series 7 Exam
Successfully passing the FINRA Series 7 exam is a big step for financial services industry professionals. It represents the culmination of professional knowledge and extensive studying to pass one of the industry’s most comprehensive exams, earning those who put in the time and effort the impressive Series 7 license holder designation.
Information on this page has been gathered by a multitude of sources and was most recently updated on July 2020.
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