If you need to know about the Financial Industry Regulatory Authority (FINRA) Series 7 exam, you are definitely in the right place.
In this article, we cover all the critical information candidates should know about this exam, a continuation on from the Securities Industry Essentials (SIE) exam.
FINRA Series 7 is a natural progression from that and in studying it thoroughly, we look at the following:
So read on to get the low down on the Series 7, a popular choice amongst financial professionals.
The Series 7 Exam Rundown
While there are many aspects to the Series 7 licensing exam, to begin, let’s start by looking at a general rundown.
Commonly known as the General Securities Representative Exam (GS), it’s one of the paths to becoming an entry-level registered representative.
That’s once they’ve passed their co-requisite Securities Industry Essentials (SIE) exam, of course.
But just like the other Series exams offered by FINRA, it’s all about testing the overall competency of each candidate as a general securities representative.
If you pass the exam, your securities license then allows you to sell securities products such as:
- Corporate and municipal securities
- Investment company products
- Government securities
- Variable annuities
- Direct participation programs
- Variable contracts
- Money market funds
- Mutual funds
- Stocks and bonds
- Hedge funds
These are the kinds of investment products offered by stockbrokers, amongst others.
If you wish to operate as a stockbroker, you need to secure your Series 7 licensing first.
This license does not allow for the following types of securities:
- Commodities futures
- Life insurance
I’ve mentioned that the SIE exam is a pre-requisite to securing your Series 7 license.
While individual candidates can sit for that exam, that’s not the case with the Series 7 test.
Sponsorship is essential for all candidates, either by a self-regulatory organization (SRO) or a FINRA-member firm.
Those broker-dealer candidates sponsored by a FINRA-member firm will also need a Uniform Application for Securities Industry Registration form, also known as a Form U4.
What employment options are there for someone who has taken the Series 7 exam?
There are numerous areas in which a candidate that has passed their Series 7 exam can operate.
Registered representatives can operate at brokerage firms that market and sell investments as we’ve already listed above.
You are probably wondering what type of businesses they work for?
Well, most will be found in broker-dealers or investment firms for the most part or any other finance company that sells those kinds of products.
How does the Series 7 top-off exam differ?
If you are starting out in the securities business and looking to complete a Series 7 licensing, you might be a little confused.
That’s because you’ve no doubt seen that there is not only a Series 7 exam but a top-off one as well.
So what’s that all about?
Well, FINRA wants to ensure that everybody working in the securities industry is licensed.
The top-off exam is aimed at those who may have started in the industry before any of these exams existed.
It allows those already working in the industry and who don’t have a particular license, to obtain one.
Format Of The Series 7 exam
Four major functions form part of the Series 7 coursework and exam.
These are:
- Function 1 description: Seeks Business for the Broker-Dealer from Customers and Potential Customers
- Function 2 description: Opens Accounts after Obtaining and Evaluating Customers’ Financial Profile and Investment Objectives
- Function 3 description: Provides Customers with Information About Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records
- Function 4 description: Obtains and Verifies Customers’ Purchase and Sales Instructions and Agreements; Processes, Completes, and Confirms Transactions
Question allocations within each function
The various functions mentioned above will differ significantly when it comes to questioning allocations in the exam.
While all are important, knowing which of these functions contributes the most questions is critical for your Series 7 exam prep and understanding the exam content outline.
Without a doubt, you will need to ensure that the functions that contribute the most are thoroughly covered in your preparation and practice exams.
Don’t forsake those functions that contribute less, however.
The question that makes you achieve a passing score or a fail might just come from one of them too.
Overall, the exam consists of 125 multiple-choice questions.
They are broken down as follows.
Function 1
Just nine questions will come from Function 1.
That represents just over 5% of the total paper making this function the smallest contributor to the exam.
Questions here deal with:
- Regulation for advertising materials
- Public communication
- Rules and regulations about investment salespeople including brokers and securities dealers
Function 2
Function 2 doesn’t contribute that many questions to the exam either.
You will find 11 questions based specifically on the course content from this function.
That’s a little over 8% of the overall paper which makes this function the second smallest contributor.
Questions here deal with:
- Providing account types, related disclosure, and restriction information to customers
- Opening a brokerage
- Advisory accounts
- Creating and maintaining client profiles
- Obtaining approvals
Function 3
The bulk of the exam is taken from Function 3.
It clocks in at 91 questions out of the 135 in total.
That’s a massive 67% or just over two-thirds of the total questions you will have to answer.
This is the function that you need to spend much of your study time getting to know.
Your core understanding of what is documented in this function will determine if you pass the Series 7 exam with ease or not.
Questions here deal with:
- Industry regulations specifically regarding investment strategies, production options, customer profiles, and record keeping.
- Securities law regarding record keeping, customer profiles, production options, and investment strategies.
Function 4
This is the last function and it contributes the second biggest amount of questions in this licensing exam.
In reality, however, it’s not that much.
It’s just 14 out of 135 or just over 10%.
Questions from this function will deal with:
- Understanding of both processing client orders and trades and executing them
- Knowledge of regulatory requirements related to reporting and record-keeping, transaction settlements, margin, and complaints from customers.
As mentioned before, although around two-thirds of questions are from function three, candidates must regard all other functions as critical knowledge.
Ultimately, a third of the exam questions will come from these other three functions.
Series 7 exam questions format and exam duration
Multiple-choice questions are the format that FINRA uses on the Series 7 exam.
All FINRA exams use this form of question format.
As we’ve seen already, the exam consists of 135 questions.
10 of these won’t count towards your scoring, yet they still must be answered.
And you won’t have any idea of which questions count and which don’t as they are included in the exam at random places.
From a time management point of view, FINRA provides all candidates with three hours and 45 minutes to complete those 135 questions.
That’s around one and a half minutes per question, which is ample if you’ve taken the time out to study the coursework thoroughly.
Exam cost and pass rate
Series 7 is the most expensive of the FINRA representative-level exams.
Those candidates who register for it will pay $245.
That registration payment is made upfront and must be completed before any candidates are allowed to schedule the exam at a time that suits them best
Take note, however, that once you’ve registered and paid for your Series 7 exam, you must schedule a test within 120 days of the registration taking place.
If you do not, you will need to register and pay the exam fee again.
There’s some debate on the passing score for this exam with some claiming that it’s 65% and others higher.
Kaplan Financial, however, says that around 72% of candidates pass this exam.
That’s on par with other FINRA exams and certainly proof that without adequate preparation, there isn’t much hope of getting through on your first attempt.
With a passing score of 72%, candidates need to get 98 questions out of 135 correct.
It strongly advised that candidates that want to ensure they are one of the 72% of people who pass, prepare thoroughly.
And that doesn’t just mean that you read through the coursework.
Including other forms of preparation are key to making this a success of this licensing exam.
For example, extra exam prep could include:
- Using flashcards to identify where you are strong or lacking in knowledge
- Writing practice exams. If you aren’t passing them, you’ll stand little chance with the Series 7 exam itself.
- Using study materials that are specifically made to help achieve this FINRA license by third parties
Of all of these, practice exams are the one study help that allows candidates to judge if they are ready or not.
Don’t just take one of them either, even if you pass the first time.
The more you attempt, the better prepared you will be.
Series 7 Exam Registration
As a Series 7 candidate, registration through FINRA is the only way to take the Series 7 exam.
The registration process is carried out online and you can find the FINRA registration portal by clicking here.
Registration as well as paying the exam fee of $245 will allow candidates to schedule their exam within 120 days from their registration date.
This is standard for all financial series exams offered by FINRA and more than enough time to prepare.
And let’s be honest, with the Series 7 exam cost of $245, you want to make every effort to pass on your first attempt, right?
Registration includes creating an account on the Test Enrollment Services system.
This is a necessity whether you choose to write at a Prometric Test Centre or online.
If you’d prefer, candidates can take all FINRA exams, including the Series 7 exam, online.
Your preference can be indicated during the registration process.
It’s important to remember that certain criteria have to be met should you wish to take the exam online.
- You will need to use your laptop or one from the institution that has sponsored you
- It should have either a movable camera connected to it or a webcam
- All candidates will be checked through the camera to make sure their workplace doesn’t include crib notes
- Your internet connection must be quick enough as well as stable to help you perform the exam without disruptions
- You must be willing to download the necessary software used to determine if all the requirements are met and to run the exam efficiently.
Should you meet all of those requirements, you make take the Series 7 test online.
Scheduling your exam and cancellation policy
Candidates who have registered for a FINRA exam and paid their exam fee are allowed to schedule it at a date that suits them.
Remember, however, that the exam must be written within 120 days of the registration date.
Yes, it is four months and seems like a fairly decent amount of time to get ready for the exam, but you should start preparation immediately.
Remember, while the Series 7 certification has four functions like most other FINRA exams, it’s critical to note that it is a long exam and you’ve got to put in as much time as you can to ensure you are ready.
But what about canceling or rescheduling should you have to?
Sometimes life throws us curveballs that mean you might not be able to take your exam on the original date.
Well, moving it certainly is an option but FINRA has some hard and fast rules when it comes to an exam rescheduling and cancellation.
And here it is:
- Candidates who reschedule or cancel their exams and need a date will be charged $30 if that cancellation is within 10 days of the exam.
- Candidates who reschedule or cancel their exams more than 10 days before the exam won’t be charged a fee at all.
- Candidates who reschedule or cancel their exams three days or less before their registered date will pay a fee of $60.
If you’d like to learn more about FINRA’s cancellation policy for the exams they offer including the Series 7, Series 63, and all others, then click here.
The Day Of The Exam
Whether you are choosing to write at a testing center or online, let’s go through what candidates can expect on the day of the exam.
Writing at a testing center
There are Prometric testing centers for FINRA exams all over the United States.
When writing at one, there are a few things that you should bear in mind that will make sure the whole process is smooth sailing.
You must be punctual.
I’m not talking about arriving at the time your exam starts either.
You will need to be there at least half an hour before you start.
You will be given some leeway, however, but should you arrive 30 mins after your scheduled time, well then you cannot write.
If this does happen to a candidate, they are allowed to reschedule but there are costs involved to do so.
Yes, even if it wasn’t your fault that you were late.
Note that should you arrive early and get set up, the exam invigilators will let you start the exam early.
So if you are ready 15 minutes before the scheduled exam time, you can begin but you will still receive only the time limit given for each exam.
There’s a few key pieces of documentation that candidates must not forget on the day.
These are:
- The email confirmation you would have received when booking your exam date
- A valid identification
- The email address that you registered the exam with
Before you can start the Series 7 exam, candidates must:
- Show their pockets and sleeves (if they have long shirt) to prove they aren’t carrying anything that could help them during the exam.
Finally, once the exam has started, it cannot be paused at any point.
Note that all the necessary stationery needed to complete the exam will be supplied by the testing center.
This includes paper, pens, and a four-function calculator.
You cannot bring your own.
Writing online
Before you can write the exam online, all candidates would have downloaded the necessary software to perform pre-exam checks.
This helps establish if the laptop and connection you plan to use to write the exam will work effectively.
On the day of the exam, you will first make use of the webcam or 360-degree camera to show the invigilator you don’t have any notes near you.
The webcam is again used thereafter to identify each candidate as well as for showing that you don’t have any crib notes in your pockets or hiding in your sleeves.
As with writing at a test center, the exam will not be paused at any point.
And if you need to go to the toilet, for example, you must get authorization to do so.
Note that the digital exam will allow you to go back to previous questions and change answers if you would like to.
To find out more about writing the exam online, you can click here.
Rewriting the exam
Should a candidate fail the exam, rewriting it is an option.
There are a few rules that need to be adhered to, however.
Each time you rewrite the exam, it will cost you the full price of $245.
If that’s not reason enough to prepare properly, well, then nothing is, right?
But should you fail and you are willing to pay another $245 to attempt it again, you can only do so after 30 days have passed.
That counts for your third attempt too.
Yes, you must wait another 30 days between a second and third attempt.
Hopefully, candidates have passed by then, however, otherwise not only is it going to cost them $245 exam fee again but now the period to wait jumps to 180 days since your last attempt.
And 180 days is a long time, especially when you are trying to get your career up and running.
Conclusion
Without a doubt, the Series 7 exam from FINRA is a tough one and expensive too.
But by reading this article, no doubt you’ve got much more of an insight into the Series 7 license requirements as well as the Serie 7 exam requirements.
It’s certainly one that candidates who choose this path in the securities industry are going to have to prepare for properly.
So to a question we often get, “is the Series 7 exam hard” I say yes, without a doubt.
Make sure you prepare as thoroughly as you can.
Should you have any questions that we may not have answered in this article, please feel free to leave a comment below.
We will get back to you with an answer.
FAQ
References
1. FINRA
2. Investopedia
3. Corporate Financial Institute
6. Career Trend
