Series 6 Exam vs. Series 7 Exam: An Overview
The Financial Industry Regulatory Authority (FINRA) offers a variety of licenses that must be obtained by passing examinations before registered representatives or investment advisors can conduct business. Two of the most popular are the Series 6 and Series 7 exams. The Series 6 license allows a registered representative to sell only a specific type of investment products, whereas the Series 7 license allows the rep to sell a wider variety of securities.
- The Series 6 and the Series 7 are two of the most popular of what FINRA calls its qualification exams. Passing them is required to obtain a license to buy and sell certain types of investments.
- A self-regulatory organization or a FINRA-member firm—such as a brokerage—must sponsor a candidate who wants to take these exams.
- The Series 6 exam—officially, the Investment Company and Variable Contracts Products Representative Qualification Examination—allows you to sell certain "packaged" products like mutual funds and variable annuities.
- The Series 7—officially, the General Securities Representative Qualification Examination—allows you to sell everything covered under the Series 6, plus stocks, bonds, exchange-traded funds (ETFs), and options.
- Of the two tests, the Series 7 is longer and requires a higher passing grade—as befits a more comprehensive exam.
Series 6 Exam
The Series 6 exam—officially, the Investment Company and Variable Contracts Products Representative Qualification Examination—is a multiple-choice test with 50 items. A score of 70 or better is required to pass. Upon successful completion of the exam, representatives are qualified to solicit, purchase, and sell certain "packaged" products like mutual funds and variable annuities—products commonly sold by financial planners.
Candidates must be affiliated with and have sponsorship from a FINRA member firm before registering for the exam.
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. Exam applications without sponsorship are rejected.
Series 6 questions are broken down into four sections related to job functions.
- Function 1 deals with regulatory fundamentals and business development and is allocated 12 questions.
- Function 2 has 8 questions and focuses on evaluating customers' financial information, identifying investment objectives, providing information on investment products, and making suitable recommendations.
- Function 3 has 25 questions concentrating on opening, maintaining, closing, and transferring accounts, and retaining appropriate account records.
- Function 4 has 5 questions that center around obtaining, verifying, and confirming customer purchase and sale instructions.
Series 6 Special Considerations
After successful completion of the exam, a Series 6 licensed representative can recommend and sell to clients:
- Mutual funds (closed-end funds on the initial offering only)
- Variable annuities
- Variable life insurance
- Unit investment trusts (UITs)
- Municipal fund securities [e.g., 529 savings plans, local government investment pools (LGIPs)]
However, holders of the Series 6 license are not permitted to sell corporate or municipal securities, direct participation programs, stocks, or options.
To conduct business in annuity or insurance products, a representative must also pass a state life insurance examination. Common jobs utilizing the Series 6 license include financial advisors, retirement plan specialists, investment advisors, and private bankers.
Before taking either the Series 6 or the Series 7, candidates must pass the Securities Industry Essentials (SIE) exam. This introductory-level exam assesses a candidate’s knowledge of basic securities industry information. Some candidates take the SIE and one of the other two tests on the same day.
Series 7 Exam
The Series 7 is officially called the General Securities Representative Qualification Examination. It is a multiple-choice exam, with 125 items, and lasting 3 hours and 45 minutes. The passing grade for the Series 7 exam is 72 or higher.
As with the Series 6, candidates must be affiliated with and have sponsorship from a FINRA member firm before registering for the Series 7 exam. It includes four functions:
- Function 1 pertains to seeking business for a brokerage firm from customers and potential customers.
- Function 2 relates to opening accounts after assessing a customer's financial background.
- Function 3 covers information about investments, suitable recommendations, transfers of assets, and record keeping.
- The fourth function relates to doing transactions.
Series 7 Special Considerations
The Series 7 license allows financial advisors to engage in buying and selling virtually all securities-related investment products. In addition to everything covered under the Series 6 exam, products include common and preferred stock, bonds, exchange-traded funds (ETFs), real estate investment trusts (REITs), and options. It is the examination required for stockbrokers and is a prerequisite for many other securities licenses.
The Bottom Line
The Series 6 and the Series 7 are two of the most popular of what FINRA calls its qualification exams. Passing them is required to obtain a license to buy and sell certain types of investments for clients, as brokers, financial planners, investment managers, and other financial professionals commonly do.
Of the two, the Series 7 is the tougher but more comprehensive exam. It allows you to deal with almost any type of security, from stocks to bonds to investment trusts and funds, that a professional or retail investor would want. Just about all stockbrokers and money managers have the Series 7 license, as well as the Series 6.
In contrast, the Series 6 is more limited. It mainly offers a license to deal in retail-investor-oriented products, like mutual funds and insurance annuities. It notably excludes individual equities, bonds, and ETFs—securities actively traded on financial exchanges, in other words. Financial planners who sell products from investment management companies and insurance companies to individuals could probably get by with just passing the Series 6.