The Series 7 is perhaps the most common individual license in the investment industry. The formal name for this license is the General Securities Representative Examination. It is a very versatile certificate that allows its holders to conduct multiple types of transactions across countless product lines. These types of licenses are regulated at the federal level and are strictly monitored for compliance with various types of legislation regarding conduct of the license holders.
The Series 7 license is administered and authorized by the Financial Industry Regulatory Authority (FINRA), formally known as the National Association of Securities Dealers (NASD). FINRA is responsible for overseeing the conduct of registered representatives across the country and enforcing the rules and regulations concerning interactions with the public. FINRA is not a government organization, but is instead a private corporation. However, due to its sheer size and influence, FINRA often works in conjunction with and provides assistance to the Securities and Exchange Commission (SEC), which is a government-run organization with similar goals and responsibilities.
The Series 7 license is the most comprehensive of all FINRA licenses. This license is important for communicating with retail clients because it demonstrates the broker’s general knowledge of multiple industry products and regulations. The Series 7 can be considered the foundation for further professional expansion into more specific areas of expertise in the investment industry.
Many industry professionals do not proceed with obtaining further licenses or certificates once they pass the Series 7. As with any industry, there are a number of people who generalize and conduct very mainstream business transactions, and there are others who strive to become experts in one particular niche area. FINRA issues licenses of varying types depending on a particular broker’s interests and capabilities. A Series 7 license holder is permitted to work with retail investment clients and conduct transactions involving a wide range of securities like stocks, bonds, mutual funds and options contracts.
The length of time to obtain the Series 7 license will depend entirely on the abilities of the potential broker. Many self-study courses and materials are available to prepare the hopeful candidate, as well as in-person classroom courses. When a candidate feels prepared to sit for the formal examination, a proctored test is arranged through an independent testing agency. The exam consists of 250 multiple choice questions, of which 70% must be answered correctly for a passing grade.
Potential Series 7 candidates should consider the fact that most states will also require the broker to pass the Series 63 examination, formally known as the Uniform Securities Agent State Law Examination. Essentially, the Series 63 is very similar to the Series 7, but in much less depth. Also, potential industry professionals may want to consider investigating the Series 6 instead of the Series 7 license, and compare the different capabilities of those certificates. The Series 6 is very similar to the Series 7, and in many instances is perfectly adequate for certain industry job positions, and is also much easier to acquire in terms of the amount of knowledge required to pass the test.
There are extremely severe state and federal penalties for conducting securities-related business without a proper industry license. It is absolutely essential for brokers and other professionals to understand the limitations of their licenses, and to ensure their business activities do not include transactions or interactions that are beyond the scope of what is permitted. Penalties for conducting unauthorized transactions or being involved in violations of industry regulations can include license suspension or termination, heavy fines or even jail.