Information on the Series 7 Exam

If you want to trade investments, you must hold a Series 7 license.

Whether you're considering a career as a stockbroker or planning to expand your existing insurance and/or planning practice to include investment and securities products, you must first take the exhaustive Series 7 exam under the direction of the Financial Industry Regulatory Authority (FINRA). Once you have passed this exam as well as a background check, you will become a licensed general securities registered representative with the lawful ability to provide investment advice and to sell virtually every security/investment product available (save for commodities and futures, which require the specialized Series 3 license). The Series 7 exam is accepted as the most difficult and time-consuming of all securities exams, most of which may only be taken after first passing the Series 7 exam.

Exam Requirements

The Series 7 exam is a difficult--but worthwile--undertaking

Apart from knowledge of the fundamentals of investments and investment planning, there is technically only one prerequisite to register for the Series 7 exam: You must be sponsored by a FINRA-member financial firm or a self-regulatory organization. The best way to secure a sponsorship is to get in with a broker/dealer that considers the cost of the exam part of its employee benefits package. More commonly, however, a brokerage firm may sponsor new employee prospects, with employment contingent on passing the exam.

Question Format

As of 2010, the Series 7 exam is composed of 260 multiple-choice questions, each of which has four possible answers. Then of the questions aren't calculated into your overall score because FINRA included them to determine whether they are appropriate for use on future exams.

Allotted Time

Candidates have six hours to complete the Series 7 exam.

Each individual is given a total of six hours to take the exam. Typically, you will spend three hours answering 130 questions, take a lunch break, and then test for another three hours to complete the test's final 130 questions. Most advisers find that six hours is more than enough time to complete the exam.

Areas of Emphasis

The Series 7 exam covers what FINRA describes as the seven "critical functions" of a licensed investment adviser. Forty-nine percent of the questions focus on providing clients and prospects with good investment information and ensuring suitable recommendations; 21 percent deal with explaining how the organization, participants and functions of a variety of securities markets may affect your clients; and maintaining proper account records, as well as opening, closing or transferring accounts account for 11 percent of the questions.

Other questions focus on how to help clients identify their investment objectives after reviewing their financial needs, current investments and capital available for investing; taking and verifying clients' buy and sell directives, entering orders and ensuring transactions are completed properly; monitoring and making portfolio recommendations based on both client needs and goals as well as economic conditions; and finally, seeking out new business for your broker/dealer.

Grading

You either pass or fail the Series 7 exam--there are no scores. To pass, you must answer at least 70 percent of the test's questions correctly. If you fail the exam, you may retake it after 30 days have elapsed, and there is no limit on the number of times you may attempt to pass the Series 7 exam.

References

• Investopedia: Series 7 - Getting Started
• FINRA: FINRA Registration and Examination Requirements
• New York Stock Exchange: Content Outline for the General Securities Registered Representative Exam (Test Series 7)