While most prominent investment firms only hire professionals with post-secondary degrees, graduating from college isn’t a requirement to becoming a stockbroker. Prospective stockbrokers do, however, need to pass the Series 7 exam, also known as the General Securities Representative Qualification Examination, in order to qualify to legally purchase or sell securities products such as municipal fund securities, corporate securities, options, and variable contracts. Series 7 exam candidates need to be sponsored by a Financial Industry Regulatory Authority (FINRA) member firm.
As of October 1, 2018, exam candidates also need to complete the Securities Industry Essentials (SIE) exam. This is an introductory-level exam that covers a variety of securities topics and was designed to measure each candidate’s knowledge of fundamental concepts, securities products and their risks, and prohibited practices, among other topics. The SIE is a 75-question exam with questions in the following four sections: Knowledge of Capital Market; Understanding Products and Their Risks; Understanding Trading, Customer Accounts, and Prohibited Activities; and Overview of Regulatory Framework.
While Series 7 exam candidates need to be sponsored by a FINRA member firm to take the test, there are no requirements for individuals to take the SIE. Once a person completes the SIE, they have four years to complete the Series 7 exam or other top-off exams like the Series 6 (Investment Company Representative), Series 57 (Securities Trader), or Series 82 (Private Securities Offerings Representative).
Before FINRA introduced the SIE, the Series 7 exam was composed of 250 questions spanning five major job functions. Candidates had to pay $305 to take the exam and had six hours to complete it. Now, the exam contains 125 multiple choice questions and has a time limit of 3 hours and 45 minutes. Exam registration is $245 and the passing score is 72 percent.
The 150 multiple choice questions are broken down into the following sections: 91 questions in Provides Customers with Information about Investments, Makes Suitable Recommendations, Transfers Assets, and Maintains Appropriate Records; 14 questions in Obtains and Verifies Customers’ Purchase and Sales Instructions and Agreements; Processes, Completes, and Confirms Transactions; 11 questions in Opens Accounts after Obtaining and Evaluating Customers’ Financial Profile and Investment Objectives; and nine questions in Seeks Business for the Broker-Dealer from Customers and Potential Customers.
Once a candidate passes the Series 7 exam, they are permitted to sell covered products and activities such as mutual funds, stocks and bonds, exchange-traded funds, direct participation programs, municipal securities, and real estate investment trusts. They are not, however, authorized to sell real estate or life insurance products.
Some states also require stockbrokers and investment professionals to complete the Series 63 exam, in addition to the Series 7, to sell securities. Also known as the Uniform Securities Agent State Law Exam, the 65 multiple choice question test covers specific state laws and regulations and is developed by the North American Securities Administrators Association. FINRA administers the exam.
Those looking to earn their Series 7 license can complete the exam online by filling out and submitting the FINRA Online Exam Administration Request Form. In-person tests are also offered at select locations. There is no physical documentation for proof of exam completion. Instead, employers can access a current or prospective worker’s credentials via FINRA’s Central Registration Depository.
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