The General Securities Representative Examination
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Written byCFI Team
What is the Series 7 Exam?
The Series 7 exam is formally known as the General Securities Representative Examination, and it is administered by the Financial Industry Regulatory Authority (FINRA). In the United States, financial professionals are required to take and pass the exam to obtain a license to trade security products, such as corporate securities, municipal fund securities, investment company products, etc.
A majority of employers in the financial services industry require potential employees to have passed the Series 7 exam as one of the entry requirements. In October 2018, FINRA enacted a prerequisite exam known as the Securities Industry Essentials (SIE) exam to evaluate a candidate’s knowledge of basic financial concepts.
Summary
- The Series 7 exam is an exam and license that gives successful candidates the authority to sell all types of securities such as stocks and bonds, except commodities and futures.
- It is an entry-level requirement for stockbrokers who want to buy and sell securities in the United States.
- The exam comprises 125 multiple-choice questions, and candidates are required to score at least 72% to pass.
Understanding the Series 7 Exams
The Series 7 exam is a licensing exam for stockbrokers and other financial services professionals who are involved in the trading of securities, such as stocks and bonds, except commodities and futures. The exam tests a candidate’s knowledge of the functions of a broker, such as the sale of corporate securities, investment company products, government securities, options, variable annuities, packaged securities, direct participation programs, and municipal securities.
Professionals who pass the exam become officially registered representatives of the Financial Industry Regulatory Authority, and it also increases their employability in the financial services industry. The Series 7 exam does not cover real estate properties or insurance products. To sell real estate and insurance products, brokers must take other exams and licenses.
Apart from being equipped with industry knowledge, finance practitioners who pass the Series 7 exam are required to abide by stricter standards compared to unlicensed brokers. FINRA requires licensed brokers to uphold the highest standards so that their clients receive the best service.
Series 7 Exam Requirements
Effective October 1, 2018, FINRA introduced the Securities Industry Essentials (SIE) exam, which candidates must pass before sitting for the Series 7 exam. The SIE is an introductory exam for entry-level brokers. It tests common topics, such as regulatory agencies and how they function, acceptable and unacceptable industry practices, product knowledge, and fundamentals of securities trading. The SIE exam does not require potential candidates to be sponsored by a FINRA member firm.
One of the requirements provided by FINRA for Series 7 exam candidates is that they must be sponsored by a member firm. The sponsoring firm must file Form U4 – i.e., Uniform Application for Security Industry Registration – for a candidate to be enrolled for the Series 7 exam.
The sponsoring firm is also required to cover the Series 7 exam fee. Both the SIE and the Series 7 exam are corequisites, meaning that candidates must pass both exams to get a securities trading license. Potential candidates can opt to take both exams in any order, as long as they pass both exams within the prescribed period.
Series 7 Exam Structure
The Series 7 exam comprises 125 multiple-choice questions that candidates are required to complete within 3 hours and 45 minutes. It means that the candidate is allowed one minute and 48 seconds per question. The passing score for the exam is 72%, which candidates must achieve to obtain a practicing license. The cost of the exam is $245 – a reduction from the previous $305 exam fee.
Before October 1, 2018, candidates were required to complete 250 questions within six hours, with the exam fee being $305. Candidates were only required to pass the Series 7 exam since there was no SIE exam. After the new Series 7 exam format was adopted, the test is now shorter and fairly priced. Also, candidates must pass both SIE and Series 7 exams to become licensed brokers.
Upon completion of the Series 7 exam, FINRA does not award physical certificates to successful candidates. Instead, potential employers can access the proof of exam completion on FINRA’s Central Registration Depository (CRD). The Series 7 exam also serves as a prerequisite to other securities exams, such as Series 24, Series 26, and Series 31.
Attempts Allowed for the Series 7 Exam
If a candidate does not pass the Series 7 exam on their first attempt, FINRA allows them to re-take the exam after 30 days. There is no limit on the number of times a candidate can attempt to pass the exam, but there are time restrictions for candidates who’ve taken the exam several times.
For the first three attempts, a candidate is required to wait at least 30 days before sitting for the exam again. After three unsuccessful attempts, the candidate is required to wait at least six months to re-take the exam.
Additional Resources
CFI offers the Capital Markets & Securities Analyst (CMSA)® certification program for those looking to start or advance their careers to the next level. If you enjoyed our article on Series 7 and are interested in learning more about security products, the following resources and courses will be helpful:
As an expert with a deep understanding of financial regulations and industry certifications, particularly in the field of securities trading, I can confidently provide insights into the concepts mentioned in the article about the General Securities Representative Examination, commonly known as the Series 7 exam.
Series 7 Exam Overview:
1. Purpose and Administration:
- The Series 7 exam, formally the General Securities Representative Examination, is administered by FINRA (Financial Industry Regulatory Authority).
- It is a prerequisite for financial professionals in the United States who intend to trade various securities, excluding commodities and futures.
2. Exam Content and Importance:
- The exam assesses candidates' knowledge of a broad range of financial instruments, including corporate securities, municipal fund securities, and investment company products.
- Successful completion of the Series 7 exam is a crucial requirement for entry into the financial services industry, particularly for stockbrokers.
3. Exam Structure and Passing Criteria:
- The Series 7 exam consists of 125 multiple-choice questions.
- Candidates must score at least 72% to pass the exam.
- The time allotted for completing the exam is 3 hours and 45 minutes.
4. Securities Covered:
- The exam covers various securities, such as stocks and bonds, excluding commodities and futures.
- It encompasses knowledge areas like the sale of corporate securities, investment company products, government securities, options, variable annuities, packaged securities, direct participation programs, and municipal securities.
5. Securities Industry Essentials (SIE) Exam:
- Introduced in October 2018, the SIE exam is a prerequisite for the Series 7 exam.
- It evaluates candidates on basic financial concepts, regulatory agencies, industry practices, product knowledge, and securities trading fundamentals.
6. Exam Requirements and Sponsorship:
- Candidates must be sponsored by a FINRA member firm to be eligible for the Series 7 exam.
- The sponsoring firm is required to file Form U4 for the candidate and cover the exam fee.
7. Exam Cost and Format Changes:
- As of October 1, 2018, the Series 7 exam fee is $245, reduced from the previous $305.
- The exam format changed from 250 questions in six hours to 125 questions in 3 hours and 45 minutes.
8. Attempts and Waiting Periods:
- Candidates failing the exam can retake it after a 30-day waiting period for the first three attempts.
- After three unsuccessful attempts, a six-month waiting period is imposed for subsequent retakes.
9. Recognition and Career Implications:
- Successful candidates become registered representatives of FINRA, enhancing their employability in the financial services industry.
- The Series 7 exam is a prerequisite for other securities exams like Series 24, Series 26, and Series 31.
10. Continuing Professional Education (CPE):
- The article mentions CFI's Capital Markets & Securities Analyst (CMSA)® certification program for career advancement.
- It also highlights additional resources for wealth management and related courses.
In summary, the Series 7 exam is a pivotal licensing requirement for individuals aspiring to trade securities in the United States, and understanding its structure, content, and implications is vital for professionals in the financial services industry.
