What Is The Series 7 Exam
The Series 7 exam, also known as the General Securities Representative Exam (GSR exam), is a prerequisite for anyone who wants to be a licensed stockbroker able to trade in the United States.
Originally the exam was owned and maintained by the New York Stock Exchange Regulations and delivered by the National Association of Securities Dealers (NASD) from its creation in 1974. Now it is administered by FINRA (Financial Industry Regulatory Authority).
Most people who take the test are analysts, account managers, and registered dealers or brokers. Candidates should ideally possess familiarity with the stock market, finances, and different kinds of investments.
Series 7 Quick Facts
|Exam Name||Series 7|
|Sponsorship Required?||Yes - by a FINRA member firm or suitable Self regulatory member firm|
|Exam Type||Multiple Question - 4 answers choices per question|
|Number of Questions||250 (130 per 3 hr session) plus 10 pretest questions|
|Exam Duration||2 x 180 minutes|
|Pass Mark||72% (180 correct answers)|
|Administered by||FINRA Series 7 Exam|
Once you pass the Series 7 exam, you obtain your license as a stockbroker. However, you have to be affiliated with or employed by a FINRA member firm (or other applicable self regulatory (SRO) member firm) in order to sit the exam before your Series 7 license is acknowledged.
You can find further information on the eligibility requirements under NASD Rule 10312a
The Series 7 exam is meant to protect and safeguard the investing public by ensuring that the General Securities Representatives are knowledgable and competent enough to perform their jobs.
As such the exam seeks to ensure that each applicant for license has the skills, knowledge and ability to perform the role of a Registered Representative (RR). It measures the competency of the candidate at an entry level, requiring candidates to think of the questions and answers in a work related situation.
For this reason the test questions vary in complexity and difficulty with each question having either one answer or a requirement for the candidate to select the best answer from those options available.
If you are considering taking the Series 7 exam, also be aware that the questions and scenarios presented in the exam change over time, making sure the exam keeps track and takes account of any and all changes to government or industry rules and regulations, changes in practise or products.
You as the candidate are responsible for keeping up to date with all changes and amendments as FINRA will not specifically advise changes made to the exam – so assume the latest is n there and revise / learn accordingly before taking the exam.
The exam structure has been broken down into related components:-
- Rules & Regulations Knowledge: are listings of the rules and regulations associated with knowledge statements, functions and tasks, grouped by topic. There are 43 rule groups.
- Tasks: activities that are associated with the performance of a particular job function.
- Functions: there are 5 major job functions which encompass the major areas of the practices performed by an RR
- Knowledge Statements: 17 major knowledge groups describe the underlying knowledge that an RR requires to be able to competently perform job functions and associated tasks.
For a detailed outline and breakdown of the Series 7 exam content, the best information we’ve found to date is here, the Series 7 Outline by FINRA. It also has a nifty Series 7 practice exam included.
Series 7 - Major Job Functions
|Major Job Functions||% of Test Questions||Number of Test Questions|
|F1) Seeks business for the broker-dealer through customers and potential customers||27%||68|
|(F2) Evaluates customers’ other security holdings, financial situation and needs, financial status, tax status, and investment objectives.||11%||27|
|(F3) Open accounts, transfer assets, and maintains appropriate account records.||11%||27|
|(F4) Provides customers with information on investments and makes suitable recommendations.||28%||70|
|(F5) Obtains and maintains customer’s purchase and sales instructions, enters orders, and follows up.||23%||58|
Taking the Series 7 Exam On The Day
The exam is computer based and is spread over two 180 minutes sessions.
You get asked 130 series 7 exam questions in each session. (250 of the questions are marked and count towards the score, 10 are pre test questions, unidentified and sprinkled randomly throughout your test, that are being assessed for inclusion in future exams and the results – whilst assessed for response and suitability in future exams – does NOT count towards your Pass / Fail mark).
The computer system generates each exam on the fly so no two candidates questions will be the same throughout.
The examiner will provide candidates with a white board and pen/eraser plus a basic calculator. These must be returned at the end of the exam. Candidates are NOT allowed to bring any materials into the exam.
The good news is that you get a report of your test results at the end of the day which indicates if you pass or fail with a breakdown of your performance across the major job functions tested in the exam.
IMPORTANT NOTE: Starting sometime in 2016 (date to be advised – watch this site for updates), is a new requirement that anyone wishing to take the Series 7 exam will need to first take and pass the SIEE – Securities Industry Essentials Exam.
Series 7 Exam Pass Rate
Not surprisingly, one query many have is to understand what the pass rate is for the Series 7 exam. For the last few years, as no known figures are actually released, the assessed figure is believed to be an average score of 73% in the exam with a total of 65% passing first time. Means it’s worth doing some proper series 7 exam prep, ya’ think? See this thread on the Wealth Management forum for more coverage of the pass rate issue.
Series 7 Exam as a Pre-Requisite.
The Series 7 exam is one of the major securities and trading exams and, as such, is a pre-requisite for taking other exams in the Series range, as shown below:
Must Have Series 7:-
Series 9 & 10 -General Securities Sales Supervisor Examination
Optional To Have Series 7:-
Series 4 – Registered Options Principal Examination (OP)
Series 26 – Investment Company and Variable Contracts Products Principal Examination (IP)
Series 39 -Direct Participation Programs Principal Examination (DP)
Series 55 – Equity Trader Examination (ET)
Series 66 – Uniform Combined State Law Examination
Series 86 – Research Analyst Examination (RS) Part I – Analysis
Series 87 – Research Analyst Examination (RS) Part II – Regulatory Administration & Best Practices
(N.B. Optional means that in order to take Series X, you need one from a list of the other Series exams, Series 7 being one of those offered.)
Series 7 Study Guides Whilst researching and collecting the data for this article on the 7 exam, we’ve come across a few books etc that may help you prepare and understand the requirements better.
Recommended GSR Study Guides:-