What Is on the Series 7 Exam and What to Expect

The Series 7, officially the General Securities Representative Qualification Examination (GS), assesses individuals aspiring to become general securities representatives. Administered by the Financial Industry Regulatory Authority (FINRA), it evaluates the competency of entry-level professionals to perform functions within the securities industry. Passing the Series 7 signifies an individual has the knowledge to sell securities products and advise customers.

Eligibility Requirements

Eligibility for the Series 7 requires specific FINRA prerequisites. Candidates must be sponsored by a FINRA member firm or another self-regulatory organization (SRO) member firm. Firms typically initiate this registration process.

Successful completion of the Securities Industry Essentials (SIE) exam is also required. The SIE assesses basic securities industry knowledge, covering foundational concepts, product types, market structure, regulatory agencies, and prohibited practices. While the SIE can be taken by anyone 18 or older without firm sponsorship, both the SIE and Series 7 are necessary for General Securities Representative registration.

Exam Subject Areas

The Series 7 exam covers four job functions of a general securities representative, as outlined by FINRA. These functions encompass responsibilities from attracting clients to processing transactions. The content ensures candidates understand investment products, market mechanics, and regulatory compliance.

The first functional area, “Seeks Business for the Broker-Dealer from Customers and Potential Customers,” accounts for approximately 7% of exam questions. This section focuses on initial interactions with clients and prospects. It covers communication methods, emphasizing appropriate disclosures and accurate presentation of investment products. Candidates are tested on identifying potential customers, understanding business communication rules, and adhering to advertising regulations.

The second functional area, “Opens Accounts after Obtaining and Evaluating Customers’ Financial Profile and Investment Objectives,” comprises about 9% of the exam. This segment assesses knowledge of account opening procedures and client information gathering. It requires understanding different account types, associated disclosures, restrictions, and legal documentation. Candidates must demonstrate proficiency in collecting and updating customer financial profiles and investment objectives for suitable recommendations. This includes obtaining supervisory approvals for new accounts.

The third and most heavily weighted functional area, “Provides Customers with Information about Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records,” constitutes approximately 73% of the exam. This section covers the core advisory and transactional responsibilities of a representative. It covers a wide array of investment products, including corporate and municipal securities, investment company products, variable annuities, direct participation programs, options, and government securities. Candidates understand the characteristics, risks, and rewards of these products.

Within this function, the exam tests knowledge of investment strategies and their suitability for different customer profiles, including the impact of economic and market factors on investments and associated risks. Topics include equity securities, their trading characteristics, dividends, and corporate actions. Debt securities are also covered, including corporate bonds, government securities, municipal bonds, and mortgage-backed securities, with an emphasis on features, pricing, and interest rate sensitivity. Options contracts are a component, requiring candidates to understand calls and puts, strategies, suitability, and taxation rules. The exam may include calculations related to breakeven points, maximum gain, and maximum loss for option scenarios.

Investment company products, such as mutual funds, are tested regarding their structure, management, fees, and share classes. Direct participation programs (DPPs) and variable contracts are also included, focusing on their structures, risks, and regulatory aspects.

This section assesses knowledge of customer accounts, including different types, margin accounts, and retirement plans. It covers contribution limits, taxation rules, and distribution requirements. Regulatory requirements are integrated throughout, addressing rules on communication with the public, customer complaints, anti-money laundering (AML), and FINRA conduct rules. Candidates must also understand record-keeping requirements for customer accounts and transactions.

The fourth functional area, “Obtains and Verifies Customers’ Purchase and Sales Instructions and Agreements; Processes, Completes, and Confirms Transactions,” accounts for approximately 11% of the exam. This section covers the execution and post-execution aspects of securities transactions. It includes verifying customer instructions, understanding order types, and processes for trade execution and settlement. Knowledge of confirmations, statements, and asset transfers is tested. This function ensures candidates are familiar with operational aspects and regulatory requirements for completing securities transactions.

Exam Structure and Scoring

The Series 7 exam is a computer-based test assessing understanding of general securities representative functions. The exam consists of 125 scored multiple-choice questions, each with four answer choices. The exam also includes 10 unscored “pretest” questions, randomly distributed, which do not count towards the final score. This brings the total questions to 135.

Candidates have 3 hours and 45 minutes to complete the exam. There is no penalty for guessing, so candidates should attempt every question. To pass the Series 7 exam, a candidate must score 72% or higher. This translates to correctly answering at least 90 of the 125 scored questions. Test scores are statistically adjusted for variations in difficulty across different exam versions, ensuring fair comparison.

Registering for the Exam

After meeting eligibility requirements, the Series 7 registration process primarily involves the sponsoring FINRA member firm. The firm initiates registration by filing Form U4, the Uniform Application for Securities Industry Registration or Transfer, on behalf of the candidate. This form is submitted electronically through FINRA’s Central Registration Depository (CRD) system and includes personal information, employment history, and disclosures.

Once Form U4 is processed and the candidate is eligible, FINRA issues a CRD number and opens a 120-day window to schedule and take the exam. Scheduling the exam is done through a designated testing vendor, such as Prometric. Candidates provide their name, FINRA ID, the exam name (Series 7), and contact information to book an appointment. It is advisable to schedule the exam well in advance within the 120-day window to secure a preferred date and time. The exam fee, typically $300, is usually covered by the sponsoring firm.