Series 7 is
the exam required of those seeking to be licensed to sell virtually all securities offered
in the United States, with the exception of commodity futures contracts—which
requires the Series 3.
The exam is
260 questions—of which 250 are scored. The
other ten questions are trial questions. The
exam is administered in two segments of approximately three hours, extra time is allowed
for the trial questions. The vast
majority of people find the time to be more than adequate.
The exam is multiple choice, however there
are a significant number of Roman numeral style questions—resulting in answers such
as I, III and IV.
The exam
makes extensive use of the vocabulary of the industry, making learning the jargon
important.
Considering
the fact that investing is a “numbers business” it appears that there are not
that many mathematical type questions. Instead
the exam focuses on suitability of investment options for individuals with certain
financial profiles.
In most
months about 70% of those taking the exam pass it. That includes those who had previously
failed it—the first-time passing ratio is not publicly discussed—but if the 70%
includes the repeaters it’s logical to assume that the first-time ratio is less than
that.
Potential
candidates should keep in mind that the New York Stock Exchange has a regulation that
requires that newly hired brokers with their member firms must study for the exam for a
minimum of 90 days. Consequently the exam is
written to a degree of difficulty that a member firm rookie broker would find challenging,
even after studying for three months.
The exam
breaks down along these lines:
The Registered Representative and the
Customer
17 questions
Ø Requirements
for registration of individuals
Ø Standards
for public communications
Ø Investment
profiles of customers
Ø Investment
objectives
Ø Portfolio
analysis
Brokerage Products
81 questions
Ø Corporate
Debt Securities
Ø Equity
securities
Ø Municipal
Securities
Ø Packaged
securities
Ø Retirement
plans and estate tax considerations
Ø Taxation
related topics (Additional, more specific taxation issues are covered with specific
products)
Ø US
Government Debt Securities
Ø Variable
Annuities
Derivative
Products
38 questions
Ø Listed
options, basic definitions
Ø Characteristics
of equity options, index options, yield-based and debt options, foreign currency options
Ø Tax
treatment of options transactions
Ø Basic
option strategies
Opening,
Handling, and Closing of Customer Accounts
27 questions
Ø Requirements
for opening customer accounts, including approvals
Ø Rules
governing the conduct of accounts
Ø Margin
Accounts
The
Securities Markets and Regulations of the Markets
56 questions
Ø The
self-regulatory organizations (SROs)
Ø The
Primary Marketplace
Ø The
Secondary Marketplace
Ø Principal
factors affecting securities markets and prices
Ø Investment
risk (General information, specific risks related to types of investments are covered with
the respective investments)
Order Entry,
Confirmations and Settlement
13 questions
Ø Securities
orders and confirms
Ø Delivery
and settlement of transactions
Ø Record
keeping
Factors
Affecting Securities Values and Investment Decisions
18 questions
Ø Securities
Analysis
Ø Sources
of price and securities information
Ø Sources
of investment research information