A:

The Financial Industry Regulatory Authority (FINRA) offers a variety of licenses that must be obtained by passing examinations before investment advisors can conduct business. Two of the most popular are the Series 6 and Series 7 multiple-choice exams. The Series 6 license allows a representative to sell only a limited set of investment products, whereas the Series 7 license allows a representative to sell a wider variety of securities.

The Series 6

The Series 6 exam (officially, the Investment Company and Variable Contracts Products Representative Qualification Examination) is 135 minutes long and carries a passing grade of 70%. Of the 100 scored exam questions, Function 1 deals with regulatory fundamentals and business development and is allocated 22 questions. Function 2 has 47 questions and focuses on evaluating customers' financial information, identifying investment objectives, providing information on investment products and making suitable recommendations. With 21 questions, Function 3 concentrates on opening, maintaining, closing and transferring accounts and retaining appropriate account records. Function 4 has 10 questions that center around obtaining, verifying, and confirming customer purchase and sale instructions.

Upon successful completion of the exam, representatives are qualified to solicit, purchase and sell certain security products including open-end mutual funds, variable annuities, variable life insurance, unit investment trusts and municipal fund securities – products commonly sold by financial planners. To conduct business in annuity or insurance products, a representative must also pass a state life insurance exam.

The Series 7

On the other hand, the Series 7 (General Securities Representative Qualification Examination) is broken into two three-hour segments and contains 260 questions, 250 count towards the final score. The passing grade for the Series 7 exam is 72%.

The Series 7 license enables financial advisors to engage in buying and selling virtually all securities-related investment products: common and preferred stock, stock options, and government and corporate bonds. This is the license required for stockbrokers.

The Bottom Line

A self-regulatory organization or a FINRA-member firm (such as a brokerage) must sponsor a candidate who wants to take these exams. In order to schedule an exam, the sponsoring firm files the Uniform Application for Securities Industry Registration or Form U-4 with FINRA, acting as Appropriate Signatory. Applications without sponsorship are rejected.

However, beginning in October 2018, un-sponsored individuals will be able to take the new Securities Industry Essentials Exam (SIE), which includes questions common to the Series 6 and Series 7. They will only need sponsorship to take additional "top-off" exams.

Upon passing the exams and registering with FINRA through the sponsoring firm, the candidate is granted a license and becomes a registered representative.

RELATED FAQS
  1. What major is required to take the Series 7 examination?

    Find out what educational requirements are needed for the Series 7 exam. Learn about the new Securities Industry Essentials ... Read Answer >>
  2. What are my options if I fail my Series 63 exam?

    Find out what options are available to a person who has failed the Series 63 exam, a test that many states require for licensing ... Read Answer >>
  3. How many people fail the series 63 exam every year?

    How many stock brokers failed the Series 63 exam before they passed successfully? Here is what you need to know before taking ... Read Answer >>
  4. I have not received my Series 7 exam certificate. Where can I obtain it?

    The National Association of Securities Dealers (NASD) does not provide candidates with any physical certificate signifying ... Read Answer >>
Related Articles
  1. Personal Finance

    CFA Vs. Series 7: Which is Easier

    Find out which is exam is easier: The Chartered Financial Analyst (CFA) exam, or the Series 7 securities exam for registered representatives.
  2. Financial Advisor

    Series 65 Exam Prep: The Investment Advisor

    Before you take the series 65, you need to understand who is an investment advisor as defined by the exam.
  3. Financial Advisor

    Series 7 Exam Prep: Options

    One of the most challenging topics in the series 7 exam is options. Find out what you need to know before you take the test.
  4. Personal Finance

    The Securities Industry Essentials Exam (SIE)

    The Securities Industry Essentials Exam (SIE) is a new exam being introduced by FINRA to replace parts of the Series 6, Series 7, Series 22, Series 55 (57), Series 79, Series 82, Series 86/87, ...
  5. Financial Advisor

    Succeeding At The Series 63 Exam

    Your career as a securities agent begins with this test. We'll show you how to score high.
  6. Personal Finance

    What To Do If You Failed Your CFA Exam

    Follow these steps to increase your odds of passing your next CFA exam.
  7. Financial Advisor

    Tips on Passing the CFA Level I on Your First Attempt

    Obtain valuable tips and helpful study instructions that can help you pass the Level 1 Chartered Financial Analyst exam on your first attempt.
  8. Personal Finance

    Becoming A Chartered Market Technician

    The CMT certification involves three tough exams. Find out what you need to do in order to pass.
  9. Personal Finance

    Tips for Taking the CFA Exam: Part 2

    Peter Mackey, head of exam development for the CFA Institute, shares his tips for passing the CFA level I, II and III exams.
  10. Personal Finance

    Tips for Taking the CFA Exam: Part 1

    Peter Mackey, head of exam development for the CFA Institute, shares his tips for taking the CFA level I, II and III exams.
RELATED TERMS
  1. Series 42

    The Series 42 is an exam and license for financial professionals ...
  2. Series 66

    The Series 66 is an exam and license that is meant to qualify ...
  3. Series 72

    The Series 72 is a FINRA licensing exam for individuals who want ...
  4. Series 6

    The Series 6 is a securities license entitling the holder to ...
  5. Series 79

    The Series 79 exam is an examination to determine whether a registered ...
  6. Series 4

    The Series 4 is an exam and securities license entitling the ...
Hot Definitions
  1. Inflation

    Inflation is the rate at which prices for goods and services is rising and the worth of currency is dropping.
  2. Discount Rate

    Discount rate is the interest rate charged to commercial banks and other depository institutions for loans received from ...
  3. Economies of Scale

    Economies of scale refer to reduced costs per unit that arise from increased total output of a product. For example, a larger ...
  4. Quick Ratio

    The quick ratio measures a company’s ability to meet its short-term obligations with its most liquid assets.
  5. Leverage

    Leverage results from using borrowed capital as a source of funding when investing to expand the firm's asset base and generate ...
  6. Financial Risk

    Financial risk is the possibility that shareholders will lose money when investing in a company if its cash flow fails to ...
Trading Center