What is the Series 7
The Series 7 is an exam and license that entitles the holder to sell all types of securities products with the exception of commodities and futures. Known formally as the General Securities Registered Representative Exam (GSRE), the Series 7 exam and its licensing is administered by the Financial Industry Regulatory Authority (FINRA). The Series 7 license is taken by U.S. stockbrokers to obtain a license to trade. The bulk of the Series 7 exam focuses on investment risk, taxation, equity and debt instruments, packaged securities, options, retirement plans and interactions with clients. A prerequisite test for the Series 7, the Securities Industry Essentials (SIE) exam, is being rolled out on Oct. 1, 2018.
Breaking Down Series 7
The purpose of the Series 7 license is to set a level of competency for a registered representative or stockbroker to work in the securities industry. The Series 7 license is a basic requirement for an entry-level broker. The licensing exam covers an extensive range of financial terms and topics as well as securities regulations.
Candidates who pass the Series 7 exam are able to trade many securities such as stocks, mutual funds, options, municipal securities and variable contracts. The Series 7 license does not cover the selling of real estate or life insurance products. In addition to the obtaining the Series 7 license, many states require that registered representatives pass the Series 63 exam, also called the Uniform Securities Agent State Law Exam.
Series 7 Requirements
As of mid-2018, there was no co-requisite test or certification for the Series 7, but as of Oct. 1, 2018, Series 7 candidates will have to take the Securities Industry Essentials exam before sitting for the Series 7. According to FINRA, the SIE is an introductory-level exam that "assesses a candidate’s knowledge of basic securities industry information including concepts fundamental to working in the industry, such as types of products and their risks; the structure of the securities industry markets, regulatory agencies and their functions; and prohibited practices." For more, see the SIE exam content outline.
Candidates who want to take the Series 7 exam must be sponsored by a FINRA member firm. The firm must file a Form U4 (Uniform Application for Securities Industry Registration) for the candidate to be registered for the licensing exam. FINRA governs the activities of securities firms and registered brokers, making sure that anyone who sells securities products is qualified and tested. For more, see Series 7 eligibility.
Series 7 Exam Structure
Before Oct. 1, 2018, the Series 7 exam will contain 250 questions covering five major job functions. They include:
- Seeks business for the broker-dealer through customers and potential customers: 68 questions
- Evaluates customers’ other security holdings, financial situation and needs, financial status, tax status, and investment objectives: 27 questions
- Open accounts, transfer assets, and maintains appropriate account records: 27 questions
- Provides customers with information on investments and makes suitable recommendations: 70 questions
- Obtains and maintains customer’s purchase and sales instructions, enters orders, and follows up: 58 questions
The duration of the exam is six hours, has no prerequisites and costs $305. A score of 72% is required to pass.
After Oct. 1, 2018, Series 7 candidates will have to take the SIE exam before sitting for the new Series 7, which is structured as follows:
- Seeks Business for the Broker-Dealer from Customers and Potential Customers: 9 questions
- Opens Accounts after Obtaining and Evaluating Customers’ Financial Profile and Investment Objectives: 11 questions
- Provides Customers with Information about Investments, Makes Suitable Recommendations, Transfers Assets and Maintains Appropriate Records: 91 questions
- Obtains and Verifies Customers’ Purchase and Sales Instructions and Agreements; Processes, Completes, and Confirms Transactions: 14 questions
The new Series 7 exam has 125 multiple choice questions. The passing score and the exam's cost had not yet been set as of June 2018.
FINRA does not provide candidates with any physical certificate as proof of exam completion. Current or potential employers who wish to view proof of completion must access this information through FINRA's Central Registration Depository (CRD).
Completion of the Series 7 exam is a prerequisite for many other securities licenses, such as the Series 24, which permits the candidate to supervise and manage branch activities.