What is the Series 7 Exam?

The Series 7 General Securities Representative Examination (GS) verifies that candidates have the qualifications needed to make various types of trades with different kinds of general securities. The exam is administered by the Financial Industry Regulatory Authority (FINRA), which requires exam candidates to be sponsored by their registered company.

Exam Overview

The exam assesses each candidate’s knowledge of how to perform the critical functions of a general securities representative. This includes the sales of options, variable annuities and direct participation programs. It also includes corporate, municipal securities, government and investment company securities. The exam contains 250 questions and 10 additional pretest questions.

Candidates have six hours to complete the exam that is divided into in two, three-hour sessions. This means that candidates have three hours to answer 130 questions. The passing score is 72 percent. Exam candidates must sponsored by a financial company that is a member of FINRA. As an alternative, they can be a member of a Self-Regulatory Organization (SRO). The cost for the exam is $305 as of August 2016, but it was $290 in August of 2012. This exam must be passed in order for individuals to take the subsequent exams offered by FINRA.

Exam Content

There are five parts, of functions, of the exam. Function one is about pursing business for brokering deals through existing and potential customers. Function two concerns how to evaluate investment objectives, security holdings, financial situations, personal needs and tax and financial statuses. Function three asks questions regarding opening accounts, transferring assets and maintaining proper account records. Function four concerns how to provide clients with accurate investment information and make appropriate recommendations.

Function five asks questions about how to enter orders, verify purchases, provide sales instructions and follow up with clients. The exam will cover activities and products such as warrants, mutual funds, mutual funds, money markets and Unit investment trusts (UITs). There will be questions on hedge funds, private placements, venture capital, securities traders, direct participation programs, real estate investment trusts (REITs) and options on mortgage-backed securities.

Sample Questions

The exam may ask candidates about which options, such as short straddle or net debit spread, represent the most risk to clients. Another question may define how much money a customer has in securities, such as $495,000, and how much cash in their account, such as $125,000. It will then require the student to select the amount of securities and cash that the SIPC would cover if the firm was to go bankrupt.

There is usually a question that asks exam candidates about stock certificate signatures. The question may define the client’s full name and then require the candidate to choose how they must endorse their stock certificates, such as through omitting their middle initial or simply using their legal signature. Other common questions will ask about well-known laws, such as the Securities Act of 1933, and who sets the official fiscal policies of the United States Government.

In order to be successful on the Series 7 exam, candidates should master standard formulas, such as how to calculate and determine working capital, outstanding shares, balance sheets, the time value of an option and short and long market values.

You might like: Top 10 Best Online MBA Programs