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Series 7

Series 7 is a test given by the non-governmental Financial Industry Regulatory Authority (FINRA); a person passing the test is deemed ready and able to solicit, buy, and sell securities products. The Series 7 is usually taken by beginning stockbrokers-to-be who are sponsored by financial firms.

Expanded Definition

The Series 7 exam is sort of like the bar exam that lawyers must pass before they can practice. Those who pass the Series 7 test containing 250 multiple-choice questions administered over two, three-hour sessions earn the title "general securities registered representative." Those taking the exam are usually newly hired employees at financial firms who aren't of much use to the company if they don't understand and can't work with the trading of stocks and bonds. Lots of organizations offer to help prepare the would-be brokers (for a fee, of course).

FINRA administers the test as a way to protect the investing public from unqualified financial advisers. The SEC requires the Series 7 exam for anyone wanting to trade in the securities industry. The organization is a merger of the National Association of Securities Dealers (NASD) and the regulatory functions of the New York Stock Exchange (NYSE).

The seven 'critical functions' that the test measures -- compiled by those in the industry -- are being able to:

  • Give customers information on investments and make 'suitable' recommendations.
  • Explain the securities markets and the main things that affect them.
  • Open, transfer, and close customer accounts and keep account records.
  • Monitor customers’ portfolios and make recommendations when circumstances change.
  • Completes transactions.
  • Solicit customers.
  • Evaluate clients' financial needs, and current fiscal situations to help them pick investing goals.

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