What is the Series 7?

The world of finance is rich with varied career paths, each demanding a specific set of credentials and qualifications. At the heart of many of these career avenues is the Series 7 license - a pivotal certification for those involved in the sale and purchase of securities.

What is the Series 7?

Colloquially known as the Series 7, the General Securities Representative Qualification Examination (GS) is a certification that permits the holder to trade nearly all types of securities. The license excludes the authority to sell commodities and futures. Conducted by the Financial Industry Regulatory Authority (FINRA), the Series 7 exam gauges the aptitude of an entry-level registered representative, essentially enabling them to operate as a general securities representative or a stockbroker.

To be a registered General Securities Representative, candidates are required to pass two exams - the Securities Industry Essentials (SIE) exam and the Series 7 exam.

Series 7 vs. CFA: Clarifying the Differences

A common misinterpretation in the financial industry is equating the Series 7 license with the Chartered Financial Analyst (CFA) certification. However, this comparison is much like comparing apples and oranges - they serve different purposes and cater to unique career paths.

The CFA program, managed by the CFA Institute, is a demanding three-level program akin to a master's degree. It is typically pursued by those seeking to work in investment portfolio analysis, investment advisory, securities analysis, investment banking, economics, and academia. On the other hand, the Series 7 license, governed by FINRA, is necessary for those buying and selling a specific list of securities as part of their profession.

Despite the distinct paths carved by the CFA and Series 7 credentials, many finance professionals choose to acquire both to diversify their career opportunities within the financial industry.

Scope and Necessity of the Series 7 License

The Series 7 license is a must-have for individuals engaged in the solicitation, purchase, or sale of securities. This includes a wide range of financial products like stocks, bonds, mutual funds, exchange-traded funds, options, direct participation programs, and variable contracts.

As per FINRA rules implemented in October 2018, passing the Series 7 exam alone is not enough to be a new licensee. Aspiring licensees must also clear the Securities Industry Essentials (SIE) exam.

The Series 7 exam essentially licenses a representative or broker to facilitate the sale of individual securities, such as stocks and bonds, as well as options, derivatives, and private placements. The Series 7 license does not include commodities futures, which demand a Series 3 license.

What Does the Series 7 Exam Entail?

The Series 7 exam, taking around 6 hours to complete, tests candidates' knowledge of industry practices, product knowledge, ethics, fiduciary standards, economics, and valuation methodologies for businesses and securities.

For a representative to engage in solicitation, they must also pass the Series 63 exam, which focuses on state-level regulations. In scenarios where a representative solely solicits securities like mutual funds and variable annuities, which are managed externally, a combination of Series 6 and Series 63 licenses would meet the licensing requirements.

In the complex financial industry, the Series 7 license stands out as a crucial qualification for those involved in securities trading. While it serves a different purpose than the more advanced CFA certification, the Series 7 license is a stepping stone for many professionals on their path to success in the finance industry

Career Opportunities with the Series 7 License

Holding a Series 7 license provides a wide array of career opportunities within the financial industry. Licensees are qualified to pursue roles such as securities traders, investment advisors, and financial consultants. These positions primarily entail the solicitation, purchase, or sale of securities, making the Series 7 license indispensable.

Moreover, the Series 7 license may also open doors to high-level roles, such as a branch manager or a financial director, within a securities firm. It offers a competitive edge to those willing to navigate the complex landscape of financial securities.

Preparing for the Series 7 Exam

Proper preparation is key to passing the Series 7 exam. Candidates should prepare to invest significant time in understanding industry practices, product knowledge, ethics, fiduciary standards, economics, and valuation methodologies for businesses and securities.

Various resources are available to assist in the preparation process, including study guides, online tutorials, and practice exams. Many candidates also enroll in preparation courses or study programs to structure their study efforts and gain a comprehensive understanding of the exam material.

Maintaining the Series 7 License

Obtaining the Series 7 license is only the first step. Licensees must meet continuing education requirements to maintain their license. This includes participating in a Regulatory Element and a Firm Element. The Regulatory Element requires registered individuals to complete a computer-based training program on regulatory, compliance, ethical, and sales-practice standards within 120 days after their second registration anniversary date and every three years thereafter. The Firm Element consists of annual, firm-administered training tailored to the business of the firm and the representative's job function.

The Series 7 license is a vital qualification for anyone aiming to carve out a successful career in the financial industry. Its scope, coupled with its intensive examination process, provides a robust foundation for professionals seeking to provide sound advice on securities trading.

While the Series 7 license and the CFA certification are distinct, they offer complementary skill sets for financial professionals. The choice between the two - or the decision to pursue both - ultimately depends on an individual's career aspirations and the paths they wish to explore in the dynamic financial industry.

Sammary:

The general securities licensing test required by FINRA is the Series 7 examination.

Member firms who are part of the solicitation of securities which are not managed by other parties. If a representative only solicits securities such as mutual funds and variable annuities which are managed elsewhere, a Series 6 and Series 63 combined would fulfill the licensing requirements in that situation.

The Series 7 licenses a representative or broker to solicit the sale of individual securities, such as stocks and bonds, as well as options, derivatives, and private placement. The only securities that a Series 7 does not license an individual to solicit are commodities futures, which require a Series 3.

The exam takes approximately 6 hours to complete and consists of industry and product knowledge, ethics and fiduciary standards, economics and valuation methods for businesses and securities. Before a representative can engage in solicitation, the Series 63, which covers state-level regulations, must also be passed.

The examination is administered by FINRA, the securities industry self-regulatory organization (SRO).

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