What Is the Series 7 Exam For and Who Needs It?
Understand the Series 7 exam: what it is, who needs it, and how to qualify for this essential financial industry license.
The Series 7, officially known as the General Securities Representative Qualification Examination (GS), is a licensing examination administered by the Financial Industry Regulatory Authority (FINRA). This assessment evaluates the competency of entry-level professionals seeking to become registered representatives in the securities industry. It ensures a baseline level of proficiency for those entering the field and engaging directly with clients in various financial activities.
Understanding the Series 7 Qualification
The Series 7 certifies an individual’s ability to solicit, purchase, and sell a broad range of securities products. This includes corporate and municipal securities, options, investment company products, variable annuities, and direct participation programs. Individuals holding this license are authorized to work with both individual and institutional investors across these product types.
The Series 7 is designated as the “General Securities Representative” license. It allows professionals to engage in public offerings and private placements of various securities. This includes mutual funds, money market funds, unit investment trusts (UITs), exchange-traded funds (ETFs), real estate investment trusts (REITs), government securities, and certain hedge funds. This comprehensive coverage makes it a foundational license for roles involving direct client interaction and product sales within the financial services sector.
Eligibility and Sponsorship Requirements
Candidates must be sponsored by a FINRA member firm or another self-regulatory organization (SRO) member firm to take the Series 7 exam. Sponsorship means a financial firm, typically an employer, formally requests FINRA to allow an individual to sit for the exam. This often involves the firm filing a Uniform Application for Securities Industry Registration or Transfer (Form U4) on behalf of the candidate. The sponsoring firm usually covers the examination fees.
Candidates must also pass the Securities Industry Essentials (SIE) Exam. The SIE exam serves as a co-requisite to the Series 7, meaning both must be passed to obtain the General Securities Representative registration. The SIE assesses a candidate’s fundamental knowledge of the securities industry, including basic concepts, market structure, and regulatory functions. Unlike the Series 7, the SIE exam does not require firm sponsorship and can be taken by individuals not yet associated with a FINRA member firm. Candidates typically have a four-year window after passing the SIE exam to pass a representative-level qualification exam like the Series 7.
Key Topics Covered by the Exam
The Series 7 exam assesses a candidate’s knowledge across four major job functions of a general securities representative. The first function involves seeking business for the broker-dealer from customers and potential customers. This section tests knowledge related to communicating with the public and adhering to regulations concerning promotional materials.
The second function focuses on opening accounts after obtaining and evaluating customers’ financial profiles and investment objectives. This includes understanding account types, required disclosures, and gathering customer information, such as financial situation, tax status, and investment goals. The third and most heavily weighted function involves providing customers with investment information, making suitable recommendations, transferring assets, and maintaining appropriate records. This covers investment strategies, risks and rewards, security types (equities, debt, options, mutual funds), and industry regulations.
The final function addresses obtaining and verifying customers’ purchase and sales instructions, processing, completing, and confirming transactions. This tests understanding of order execution, trade confirmations, and the proper handling of customer instructions. The Series 7 exam consists of 125 multiple-choice questions, with each question offering four answer choices. Candidates are allowed 3 hours and 45 minutes to complete the examination.
The Examination Process
After a candidate secures sponsorship and passes the SIE exam, the next step involves formally enrolling for the Series 7 examination. The sponsoring firm initiates this process by filing the Uniform Application for Securities Industry Registration or Transfer (Form U4) through FINRA’s Central Registration Depository (CRD) system. Candidates must provide their Social Security number and submit fingerprints as part of this enrollment. Once enrolled, FINRA assigns a CRD number and opens a 120-day window during which the candidate must schedule and take the exam.
Scheduling the exam occurs through Prometric, FINRA’s testing administrator. Candidates select a local Prometric testing center and choose a date and time within their 120-day window. On the day of the exam, individuals must arrive at the testing center with a valid, unexpired government-issued photo identification. The exam is administered via computer, and a brief tutorial on how to navigate the test is provided before the timed session begins.
The Series 7 exam includes 125 scored multiple-choice questions, along with 10 additional, unidentified pretest items that do not contribute to the final score. These pretest items are randomly distributed throughout the exam, and candidates should attempt to answer all questions as there is no penalty for guessing. A passing score of 72% is required to successfully complete the Series 7 exam. Immediately upon completion, candidates receive a printed copy of their score report indicating whether they passed or failed.