Series 7 Exam

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In the United States, all individuals seeking to become a stockbroker must take the General Securities Representative Exam, commonly referred to as the Series 7 or Stockbroker Exam. A passing grade is required in order to obtain the professional license needed to become a Registered Representative of a broker-dealer in the United States.

The exam is a six-hour, 260 question test (250 of which count towards the final score) that is owned, maintained and administered by the Financial Industry Regulatory Authority (FINRA, previously known as the NASD), which covers a broad range of investments including stocks, bonds, options, limited partnerships, and investment company products (e.g., open- and closed-end funds). As of November 7, 2011, candidate must answer at least 72% of the questions correctly in order to pass. Upon passing the test, one is granted a Series 7/General Securities license.

The Series 7 license is the most comprehensive of several securities licenses that permit an agent to communicate with retail investors. For this reason, many account managers, analysts, and other executives in the employ of a registered Broker/Dealer hold Series 7 licenses. To satisfy the securities dealing requirements of some states, Series 7 license holders must also hold either the Series 63 license or the Series 66 license, depending on the state the licensee works in as well as the state his/her clients reside in. To provide investment advice for a fee, a stockbroker or Series 7 holder is required to complete the investment advisor law exam.

Those who pass the exam become licensed with the FINRA and must maintain good standing and complete continuing education licensing requirements. Being licensed as a Series 7 or investment advisor does not mean that the licensee is certified or chartered with a professional designation such as PFS, CFP, CWM, CFA, or other financial designation. Further, having a professional designation does not mean that a person is licensed by the FINRA.

In order to take the exam an individual must be sponsored by a member firm of either FINRA or a Self Regulatory Organization (SRO).

Typically, the average score of test-takers is around 73%, with around 66% of test-takers achieving a passing score. While one can study from the content outline provided by FINRA, many choose to use the materials of a third-party training vendor.

As of December 2012, the current registration cost is $290 according to FINRA.

Test Breakdown # of Questions  % of Exam
Seeks Business for the Broker-Dealer through Customers and Potential Customers 68 27%
Evaluates Customers’ Other Security Holdings, Financial Situation and Needs, Financial Status, Tax Status, and Investment Objectives 27 11%
Opens Accounts, Transfers Assets, and Maintains Appropriate Account Records 27 11%
Provides Customers with Information on Investments and Makes Suitable Recommendations 70 28%
Obtains and Verifies Customer’s Purchase and Sales Instructions, Enters Orders, and Follows Up 58 23%

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