Series 7

The Series 7 license exam is the General Securities Representative Examination (GS). It tests a candidate's knowledge to sell securities, municipal bonds, investment company securities, variable annuities, direct participation programs, options, and government securities. Administered by the Financial Industry Regulatory Authority (FINRA), passing the Series 7 is necessary for anyone to legally trade any type of security.

Anyone who is directly or indirectly involved in selling and trading securities needs to get their series 7 license. This goes for investment advisors who might directly be the ones advising the sale, as well as junior analysts or traders whose names will also appear on trade paperwork.

• The Series 7 exam is the general securities examination that tests a candidate’s knowledge of investment products and trading.
• It is offered by FINRA and sponsored by an employer supervised by FINRA.
• The exam is considered the hardest and longest of all the securities licensing examinations. 
• This examination is a prerequisite for many other exams like series 24, series 26, etc.

The series 7 license is mandatory for traders to begin stockbroking in the United States. Although anyone over 18 is eligible to take the examination, a FINRA member firm or any other authorized self-regulatory firm (SRO) needs to sponsor them.

This typically means that a brokerage firm has already employed the candidate and is in a training period while they begin their studies. Also, the sponsorship must cover the exam fees and file the U4 form (Uniform Application for Securities Industry Registration or Transfer) for the candidate to get entry to the series 7 test. 

The candidates also need to pass the Securities Industries Essentials exam (SIE), an entry-level exam that tests a candidate's basic understanding of trading and regulatory practices. This is because the SIE is a co-requisite to the Series 7 test to get a full license. A candidate must pass both the exams to obtain registration as a General Securities Representative.

These are the only prerequisites to sit for the series 7 test. There is technically no degree requirement.

The series 7 exam consists of 125 multiple choice questions in 3 hours and 45 minutes. This exam is also through online mode. But most importantly, the exam comprises four sections with the content and breakdown of the exam as follows:

1. Prospecting and Seeking Business for the Broker-Dealer from Customers and Potential Customers  9 questions – 7%                                                       
2. Opening Accounts After Obtaining and Evaluating Customers’ Financial Profiles and Investment Goals  11 questions - 9%
3. Providing Customers Information about Investments Making Investment Recommendations, Transferring  Assets and Maintaining Appropriate Records 91 questions -73% 
4. Obtaining and Verifying Customer’ Purchase ,Sales Instructions and Agreements, Process completion and Confirming Transactions  14 questions- 11%

Section 3, which covers 73% of the exam, deals the most with securities. This section tests topics like portfolio theory, EBITDA, profitability ratios, balance sheets, inventory valuation methods, etc.

Candidates also have to score a minimum of 72% marks to be qualified to obtain a series 7 license.

The cost of the exam itself is $245. The sponsoring firm typically pays this even though the student themselves can also pay. However, this cost does not include study materials, which the candidate needs to purchase themselves. Subsequently, study materials and books can range anywhere from $50 to $200.

Although the exact pass rates are not published, during the 2019 FINRA conference, FINRA announced that about 70% of students who had taken the exam that year had passed.

In years past, the exam was a 6 hour and 45-minute exam and cost $305 as an exam fee. However, the recent changes broke down the exam into two parts (GSE and SIE) and reduced the exam fees as well as duration. 

Generally, Series 7 and SIE are prerequisites for other, more specialized exams. For example, series 7 is a prerequisite for series 4, which allows an individual to oversee options trading personnel. 

This is important because as one furthers their financial career, they typically acquire more licenses. Series 4 and Series 24, for example, are required of professionals looking to manage other, more junior investment professionals. Such examinations are usually taken up by portfolio managers.

This has been a guide to Series 7 Licence Exam. Here we discuss requirements, exam structure, license cost, and a pass rate of series 7 exam. You may learn more about financing from the following articles -

• CFA vs Series 7
• Best CPA Review Courses
• Best CMA Review Course