Passing the Series 7 License Exam is a requirement before anyone working in the finance industry can sell or buy securities including stocks, bonds, derivatives and any other investments promoted to the general public. The exam is administered by the Financial Industry Regulatory Authority (FINRA) and covers a broad range of investments and products. In order to take the exam, generally you must be sponsored by a registered member of FINRA, although in some instances the state can act as your sponsor if you are a Registered Investment Advisor.
The Series 7 license exam is one of several securities licenses that agents must hold in order to communicate with retail investors; some states require further licenses such as the Series 63 or Series 66 licenses. Account managers, analysts and advisors employed by registered Brokers and Dealers hold Series 7 licenses, giving the investing public confidence in dealing with members of the finance industry.
The exam itself consists of 260 questions, of which at least 72% must be answered correctly in order to get a pass mark. On average, 66% of those sitting the exam obtain a pass mark, with an average score of 73%. Of the 260 questions, only 250 counts towards your final score, with the other 10 questions considered experimental questions, or practice. The cost to sit the Series 7 license exam is a non-refundable $265, as of November 2010. Check when you make your exam appointment to confirm the cost.
Typically, to register for the exams you will need to complete a U-4 application, on which you must disclose details such as previous work history, criminal convictions and anything else that may affect your ability to work in the finance industry as an advisor. Exams are offered daily, and you must pay your fee and set your own appointment time to sit the exam. Exams are sat in two consecutive 3 hour time slots, with 125 questions each.
The format of the exam is in multiple choice format, with each question having a possible four answers, with no penalties for guessing. Some questions ask you to refer to a reference book supplied by the testing centre, which contains resources such as clippings from the Wall Street Journal. A non-programmable calculator will be provided by most centers, but check when you are making your appointment, as some centers may operate differently.
Questions cover a wide range of investment areas, including:
Generating new business for the broker/dealer deals with the ethics involved in contacting potential clients and issues such as transparency and disclosure.
Evaluating customer’s financial situations and issues such as risk profile and what products or securities will help the client achieve their investment goals.
Technical expertise in opening accounts, buying and selling securities, transferring assets and general best practice record keeping.
Client communications; keeping investors informed about their current investments and making recommendations.
Accurately implementing client’s buy and sell orders and following up with the client to ensure customer satisfaction.
The series 7 license exam is a required license for anyone working in the finance industry and is designed to protect the investing public, as well as improving and enhancing industry standards.