Definition
The Series 7 is a license that is required before a person can sell securities. It is an exam administered by the Financial Industry Regulatory Authority (FINRA) in the United States. The exam measures the qualifications of an individual to work in the securities industry, specifically to provide comprehensive financial advice and brokerage services to clients.
Key Takeaways
- Series 7, formally known as the General Securities Representative Qualification Examination, is a test for entry-level brokerage representatives who want permission to trade. The certification is mandated by the Financial Industry Regulatory Authority (FINRA).
- The purpose of the Series 7 examination is to assess the candidate’s competency to perform their job as a Registered Representative. The exam measures the degree to which the candidate possesses the knowledge, skills and abilities needed to perform the critical functions of a Registered Representative.
- The exam itself covers extensive ground in financial topics. Candidates are questioned on investment risk, taxation, equity, and debt instruments, packaged securities, options, retirement plans, and interactions with customers. All necessary skills and knowledge for a future broker.
Importance
Series 7 is a crucial finance term because it refers to one of the most comprehensive licenses that a financial professional can obtain to work in the securities industry.
Officially known as the General Securities Representative Exam, the Series 7 license qualifies individuals to solicit, purchase, and sell all types of securities products, with the exception of commodities and futures.
In essence, it is seen as a gateway to a career in financial services, as it is usually the first license obtained by a new financial professional.
Thus, the importance of the Series 7 lies not only in the broad scope of its application but also in its role as a major stepping stone in a career in finance.
Explanation
The Series 7, formally known as the General Securities Representative Qualification Examination, serves a critical purpose in the finance industry by qualifying individuals to work as registered representatives, or stockbrokers, for broker-dealers in the United States.
Its purpose is to ensure that registered dealer representatives have a sufficient level of knowledge and understanding to execute their responsibilities, including selling securities, providing financial advice, and handling customer accounts.
The exam is used to evaluate an individual’s understanding of various aspects of the finance industry, including investment risk, taxation, equity and debt instruments, packaged securities, options, retirement plans, and interactions with clients.
By passing the Series 7 exam, individuals demonstrate their competence and commitment to abiding by industry standards, which in turn, aids in maintaining investors’ trust and the overall integrity of the finance industry.
Through this process, it ensures that the person is qualified to advise on investments, which in turn protects both those seeking advice and the financial industry as a whole.
Examples of Series 7
Stock Broker Career: Anyone who is looking to build a career as a stockbroker or a financial advisor needs to obtain a Series 7 license. This license permits brokers to deal with customers directly and can allow them to buy or sell all types of securities products with the exception of commodities and futures.
Investment Banking: In investment banking, professionals who are involved in trading activities or whose roles involve dealing with specific types of securities transactions also need to hold a Series 7 license. They deal with stocks, bonds, and numerous other investment products on a daily basis.
Managing Partner at Financial Advisory Firm: Managing partners, especially at financial advisory firms are also required to hold the Series 7 license. The license allows them to not only advise but also buy and sell securities on behalf of their clients, recommend investment strategies and communicate with potential investors.
Series 7 FAQ
What is a Series 7?
The Series 7 is a license granted by the Financial Industry Regulatory Authority (FINRA) that enables registered representatives to sell most types of securities. The Series 7 is also known as the General Securities Representative Qualification Examination.
What does the Series 7 allow me to do?
The Series 7 license permits you to perform the duties of a registered representative, such as selling stocks, bonds, mutual funds, and other securities. However, it does not allow you to sell real estate or life insurance products.
Why is the Series 7 important?
The Series 7 is important because it’s among the most comprehensive of all securities licenses. It covers a broad range of securities, including stocks, bonds, and mutual funds, and allows the individual to sell on all levels of the securities industry.
What is involved in the Series 7 examination?
The Series 7 examination consists of 125 multiple-choice questions covering topics like equity and debt instruments, investment risk, taxation, retirement plans, and interactions with clients. The exam lasts for 225 minutes, and the passing score is 72%.
How do I prepare for the Series 7 examination?
There are various ways to prepare for the Series 7 examination. This includes online courses, textbooks, and practice exams. You are advised to study the material thoroughly and take plenty of practice exams.
Related Entrepreneurship Terms
- FINRA (Financial Industry Regulatory Authority)
- Securities
- Equities
- Fixed-Income Securities
- Municipal Securities
Sources for More Information
- Financial Industry Regulatory Authority (FINRA): FINRA is a regulatory body overseeing brokerage firms and their registered securities representatives in the United States.
- Investopedia: Investopedia is a one-stop resource for financial education that covers a wide variety of topics including Series 7.
- U.S. Securities and Exchange Commission (SEC): The SEC is a government agency that holds primary responsibility for enforcing federal securities laws and regulating the securities industry.
- Kaplan Financial Education: Kaplan Financial Education offers a variety of Series 7 exam prep courses and study materials.
