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Series 7

Prepare for the FINRA Series 7 Exam with this comprehensive 2nd Edition study guide featuring over 5,400 practice questions, expert strategies, and in-depth coverage of all exam topics to help you pass your licensing exam and advance your career in the securities industry.

FINRA Series 7 Exam Prep: Comprehensive Study Guide with 5,337 Practice Questions to Pass Your Licensing Exam

Are you determined to pass the FINRA Series 7 Exam and become a licensed General Securities Representative? This comprehensive study guide is your ultimate solution. Updated for the latest exam content, the 2nd Edition equips you with everything you need to master the material and excel on test day.

Key Features:

  • In-Depth Content Coverage: Dive deep into all the critical topics outlined by FINRA, including equity and debt securities, options, mutual funds, ETFs, retirement plans, customer accounts, regulatory requirements, and more. Each chapter is structured to build your knowledge progressively, ensuring a thorough understanding of complex concepts.

  • 5,400+ Practice Questions: Reinforce your learning with an extensive collection of practice questions that mirror the style and difficulty of the actual exam. Detailed explanations for each question help you grasp the reasoning behind correct answers and learn from any mistakes.

  • Expert Exam Strategies: Benefit from proven test-taking strategies and tips from industry experts. Learn how to approach different types of questions, manage your time effectively, and avoid common pitfalls to maximize your score.

  • Comprehensive Appendices: Access valuable resources including key FINRA and SEC rules, a glossary of essential terms, and additional study materials to solidify your grasp of the subject matter.

  • Real-World Examples and Scenarios: Apply your knowledge to practical situations with case studies and examples that reflect real-life challenges faced by securities professionals.

  • Easy-to-Follow Layout: The guide is organized into numbered parts and chapters with clear headings, making it simple to navigate and focus on specific areas where you need the most review.

Why Choose This Study Guide?

  • Up-to-Date Content: Fully aligned with the latest FINRA Series 7 Exam Outline and industry regulations, ensuring you study only the most relevant and current information.

  • SEO-Optimized for Effective Learning: Key terms and concepts are highlighted to enhance retention and make revision more efficient.

  • Suitable for All Learning Styles: Whether you prefer reading, practicing with questions, or applying concepts through examples, this guide accommodates various learning preferences.

  • Ideal for Self-Study and Classroom Use: Perfect for individual exam prep or as a supplementary resource in training programs and finance courses.

Achieve Exam Success and Advance Your Career

Passing the FINRA Series 7 Exam is a crucial step toward a rewarding career in the securities industry. This guide not only prepares you to pass the exam with confidence but also lays a strong foundation for your professional growth.

Maximize your exam readiness and position yourself for success in the competitive field of finance with this all-inclusive guide.

About FINRA Series 7 Exam

Purpose of the Exam

The Series 7 exam is designed to assess the competency of entry-level General Securities Representatives. It seeks to measure the degree to which each candidate possesses the knowledge, skills, and abilities needed to perform the critical functions of a General Securities Registered Representative. To register as a General Securities Representative, candidates must pass both the Series 7 exam and the Securities Industry Essentials (SIE) exam. For more information, see FINRA Rule 1220(b)(2).

Structure of the Exam

The exam consists of 125 multiple-choice items, with each item offering four answer choices. The allocation of exam items for each major function is as follows:

Function Description Percentage of Exam Items Number of Items
1. Seeks Business for the Broker-Dealer from Customers and Potential Customers 7% 9
2. Opens Accounts After Obtaining and Evaluating Customers’ Financial Profile and Investment Objectives 9% 11
3. Provides Customers with Information About Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records 73% 91
4. Obtains and Verifies Customers’ Purchase and Sales Instructions and Agreements; Processes, Completes, and Confirms Transactions 11% 14
Total 100% 125

Administration of the Exam

  • Format: Administered via computer with a tutorial provided before the exam.
  • Items: Includes 10 additional, non-scored pretest items, totaling 135 items.
  • Timing: 3 hours and 45 minutes for completion.
  • Scoring: Scores are equated to a common scale using a statistical adjustment process to account for variations in difficulty.
  • Rules: No reference materials allowed; severe penalties for cheating.

For additional details, visit www.finra.org.

Function 1: Seeks Business for the Broker-Dealer from Customers and Potential Customers

Summary

1.1 Contacts current and potential customers using various methods; develops and seeks approval for promotional materials.

Knowledge of:

  • Standards and required approvals of public communications
  • Types of communications: retail, institutional, correspondence
  • Requirements for seminars and lectures
  • Product-specific advertisements and disclosures:
    • Investment company products and variable contracts
    • Options-related communications and disclosure document (ODD)
    • Municipal securities
    • Research reports (e.g., quiet periods, distribution, third-party research)
    • Government securities, CMOs, CDs

FINRA Rules

  • 2210: Communications with the Public
  • 2211: Communications about Variable Life Insurance and Variable Annuities
  • 2212: Use of Investment Companies Rankings in Retail Communications
  • 2213: Bond Mutual Fund Volatility Ratings
  • 2216: Communications about CMOs
  • 2220: Options Communications
  • 2330: Deferred Variable Annuities
  • 2360: Options

SEC Rules and Regulations

  • Securities Act of 1933

    • Section 5: Prohibitions Relating to Interstate Commerce and Mails
    • 156: Investment Company Sales Literature
    • 482: Advertising by Investment Companies
    • 498: Summary Prospectuses for Open-End Management Investment Companies

  • Securities Exchange Act of 1934

    • 15c2-12: Municipal Securities Disclosure
    • 15c3-3: Customer Protection — Reserves and Custody of Securities

Cboe Rules

  • 9.8: Addressing of Communications to Customers
  • 9.9: Delivery of Current Options Disclosure Documents
  • 9.15: Options Communications

MSRB Rule

  • G-21: Advertising

1.2 Describes investment products and services to current and potential customers

Knowledge of:

  • Process for bringing new issues to market: due diligence, registration, prospectuses
  • IPO regulatory requirements
  • Municipal financing methods and syndicate operations
  • Underwriting spread and compensation
  • Prospectus requirements
  • Information in registration statements
  • Official statements for municipal securities
  • Qualified Institutional Buyers (QIBs) and accredited investors
  • Regulations A and D offerings
  • Exempt securities and transactions
  • Private placements and resales
  • Foreign securities regulations

FINRA Rules

  • 3160: Networking Arrangements Between Members and Financial Institutions
  • 3170: Tape Recording Regulations
  • 5110: Underwriting Terms and Arrangements
  • 5121: Conflicts of Interest in Public Offerings
  • 5130: Equity Public Offering Restrictions
  • 5131: New Issue Allocations
  • 5141: Fixed Price Offerings
  • 5160: Selling Agreements
  • 5190: Notification for Offering Participants

SEC Rules and Regulations

  • Securities Act of 1933

    • Various sections and rules related to exempt securities and transactions
    • Regulation A, C, D, M, and S

  • Securities Exchange Act of 1934

    • 10b-1, 10b-3, 10b-18: Manipulative and Deceptive Devices
    • 15c2-8, 15c6-1: Delivery and Settlement Cycle Rules
    • 17a-3: Record Keeping Requirements

Trust Indenture Act of 1939

MSRB Rules

  • G-11: Primary Offering Practices
  • G-28: Employee and Partner Transactions
  • G-32: Primary Offering Disclosures
  • G-34: CUSIP and Market Information
  • G-38: Solicitation for Municipal Securities Business

Function 2: Opens Accounts After Obtaining and Evaluating Customers’ Financial Profile and Investment Objectives

2.1 Informs customers of account types and provides disclosures

Knowledge of:

  • Types and registration of accounts (e.g., trading, fee-based, TIC)
  • Requirements for customer account opening
  • Retirement plans and tax-advantaged accounts
  • Wealth events and account registration changes

FINRA Rules

  • 2270: Day-trading Risk Disclosure
  • 2130: Day-trading Account Approval Procedures
  • 4512: Customer Account Information
  • 4514: Authorization Records for Negotiable Instruments
  • 4515: Account Name or Designation Changes

Cboe Rule

  • 9.1: Opening of Accounts

Internal Revenue Code

  • 219, 415, 529, 530: Regulations concerning retirement savings and tuition programs

Employee Retirement Income Security Act of 1974 (ERISA)

2.2 Updates customer information and escalates suspicious activity

Knowledge of:

  • Customer screening (CIP, KYC)
  • Information security regulations
  • Account authorizations

FINRA Rule

  • 408T: Discretionary Power in Customer Accounts
  • 2090: Know Your Customer
  • 3260: Discretionary Accounts

SEC Rules and Regulations

  • Securities Exchange Act of 1934:
    • Section 3(a)(35): Investment Discretion Definitions
    • Regulation S-P: Consumer Financial Information Privacy

Cboe Rule

  • 9.4: Discretionary Accounts

2.3 Obtains customer investment profile information

Knowledge of:

  • Investment profile, strategy, and objectives
  • Financial factors and accreditation verification

FINRA Rules

  • 2111: Suitability
  • 2214: Investment Analysis Tools

SEC Rules and Regulations

  • 15l-1: Regulation Best Interest

MSRB Rule

  • G-19: Suitability of Recommendations and Transactions

2.4 Obtains supervisory approvals

Knowledge of:

  • Documentation and approval processes
  • Safeguarding methods for cash and securities

FINRA Rules

  • 3110: Supervision
  • 3120: Supervisory Control System

Cboe Rule

  • 9.2: Supervision of Accounts

MSRB Rule

  • G-27: Supervision

Function 3: Provides Customers with Information About Investments, Makes Recommendations, Transfers Assets, and Maintains Appropriate Records

3.1 Communicates about investment strategies and market data

Knowledge of:

  • Security selection factors
  • Portfolio analysis and theory
  • Financial statement fundamentals

SEC Rules and Regulations

  • Securities Exchange Act of 1934:
    • 14e-3, 14e-4: Material Nonpublic Information and Tender Offers

Cboe Rule

  • 9.3: Suitability of Recommendations

3.2 Analyzes investment profiles and product options

Knowledge of:

Equity Securities:

  • Types, characteristics, rights, and transactions

Packaged Products:

  • Investment companies, ETFs, UITs, variable life/annuity contracts, REITs, and DPPs

Options:

  • Listed options, strategies, and tax treatment

Debt Securities:

  • Types, yields, and tax implications

Municipal Securities:

  • Analysis, features, and tax implications

Applicable FINRA Rules

  • 2114, 2121, 2122, 2124, 2310-2341, 2350 Series: Various rules on equity securities, commissions, transactions, participation programs, and investment company securities

SEC Rules and Regulations

  • Securities Exchange Act of 1934: Rules on manipulation, penny stocks, transactions, and affiliates
  • Investment Company Act of 1940: Various sections on affiliations, changes, transactions, dividends, distribution, and fiduciary duties

Cboe Rules

  • Definitions, option adjustments, exercises, trade principles, and position/exercise limits

MSRB Rules

  • Definitions, quotations, conduct, and commissions related to municipal data

Real Estate Investment Trusts (REITs)

  • REIT Modernization Act

Internal Revenue Code

  • Sections related to distributions, dividends, wash sales, short sales, and market contracts

3.3 Provides required disclosures about investment products

Knowledge of:

  • Transaction disclosures, risk types, costs, and fees
  • Market analysis for general and municipal securities

FINRA Rule

  • 2165: Financial Exploitation of Specified Adults

SEC Rules and Regulations

  • Securities Exchange Act of 1934:
    • Section 28(e): Research and Commission Practices

Internal Revenue Code

  • Section 2503: Taxable Gifts

3.4 Communicates and retains account information

Knowledge of:

  • Customer confirmations, statements, value, transfers, and records

FINRA Rules

  • 409T, 2231, 2232, 2273, 4510, 11870: Customer statements, confirmations, and account transfer contracts

SEC Rules and Regulations

  • Securities Exchange Act of 1934: Various sections and regulations concerning confirmation, account statements, and disclosure requirements

Cboe Rules and MSRB Rules

  • Reporting, book/record maintenance, confirmation practices, and transfers

Function 4: Obtains and Verifies Customers’ Purchase and Sales Instructions and Agreements; Processes, Completes, and Confirms Transactions

4.1 Provides current quotes

Knowledge of:

  • Order types, quotes, short sales, and best execution

FINRA Rules

  • 4320, 4551, 5210-5260, 5310, 6100 Series: Short sale requirements, transaction publication, trade practices, and best execution

SEC Rules and Regulations

  • Securities Exchange Act of 1934 and regulations concerning quotation identification, disclosure, and trading systems/sales

Cboe Rules

  • 5.33, 5.7: Order definitions and information requirements

NYSE Rules

  • Various entries related to trading halts, orders, execution, and dealings

4.2 Processes and confirms transactions

Knowledge of:

  • Order tickets, market-making, reporting, and settlement requirements

FINRA Rules

  • 5330, 6000-7000 Series: Order adjustment, trade reporting, clearing, and uniform practice

SEC Rules and Regulations

  • Securities Exchange Act of 1934:
    • Section 15c6-1: Settlement Cycle

Cboe Rules

  • Exercise, allocation, and payment regulations

MSRB, Nasdaq, and NYSE Rules

  • Reports, comparison, practices, transaction services, and clearance

4.3 Resolves discrepancies, disputes, and complaints

Knowledge of:

  • Handling errors and customer complaint resolutions

FINRA Rules

  • 4513, 4530, 8000, 12000-14000 Series: Records, reporting requirements, investigations, arbitration, and mediation

Cboe Rules

  • Price binding and customer complaints

4.4 Addresses margin issues

Knowledge of:

  • Margin accounts, regulations, and calculations

FINRA Rules

  • 2264, 4210: Margin disclosure and requirements

Cboe Rules

  • General rules, margin requirements, and NYSE compliance

Federal Reserve

  • Regulation T: Credit by Brokers and Dealers

In this section

Thursday, October 31, 2024