Browse FINRA Series 7 Exam Prep, 1st Edition: Comprehensive Study Guide with 8,651 Practice Questions to Pass Your Licensing Exam

FINRA Series 7 Exam Prep, 1st Edition: Comprehensive Study Guide with 8,651 Practice Questions to Pass Your Licensing Exam

FINRA General Securities Representative Qualification Examination (Series 7)

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