What are the permitted activities of a General Securities Representative (Series 7)?

In this article, Solomon Exam Prep explains what a General Securities Representative can and cannot do and how this compares to other rep-level registrations. Continue reading

Of the representative-level FINRA registrations categories, the General Securities Representative (Series 7) registration is considered by many to be the most valuable, due to the range of products it allows you to sell. But how “general” is it? Are there other representative-level registrations that permit you do things a Series 7 representative cannot?

What is a Series 7 representative permitted to do?

FINRA allows a General Securities Representative to solicit the purchase and sales of all securities products, including:

  • Stocks, whether from IPOs, private placements, or secondary market trading
  • Other corporate securities, such as bonds, rights, and warrants
  • Mutual funds
  • Closed-end funds
  • Money market funds
  • Unit investment trusts (UITs)
  • Exchange-traded funds (ETFs)
  • Real estate investment trusts (REITs)
  • Variable contracts (insurance products whose funds are invested in securities)
  • Municipal securities
  • Municipal fund securities, such as 529 plans
  • Options
  • Government securities
  • Direct participation programs (DPPs)
  • Venture capital
  • Hedge funds

This long list of products means that a Series 7 registered rep may perform the functions of an Investment Company and Variable Contracts Representative (Series 6), Direct Participation Programs Representative (Series 22), or Private Securities Offerings Representative (Series 82).

Besides sales, General Securities Representatives may also perform certain activities closely related to sales. They may:

  • recommend investments after performing a suitability analysis for the customer
  • accept unsolicited orders
  • open customer accounts, subject to approval by a principal

What is a Series 7 representative not permitted to do?

Though a General Securities Representative may solicit purchases of IPO shares, he may not work on underwriting or structuring an IPO, or any other securities offerings. This means that he is not permitted to advise an issuer on an offering. This work requires registration as an Investment Banking Representative (Series 79).  Likewise, working on municipal underwriting requires registration as a Municipal Securities Representative (Series 52).

A Series 7 representative is also not qualified to perform the back-office functions of an Operations Professional (Series 99). Among these functions are maintaining possession or control of the firm’s securities, calculating margin for margin accounts, and sending trade confirmations and account statements.

Of course, every registered representative must also pass the FINRA Securities Industry Essentials (SIE) exam. The SIE doesn’t qualify you to do anything, instead it is a foundational exam that focuses on industry terminology, securities products, the structure and function of the markets, regulatory agencies and their functions, and regulated and prohibited practices. Unlike other FINRA securities exams, you do not need to be employed or sponsored by a broker-dealer in order to take the SIE. The only requirement is that you be 18 years old.

If you are considering taking the Series 7 exam, Solomon Exam Prep is here to help you. Solomon provides an extensive array of study material, together with resources such as study schedules, the Ask The Professor function, and important exam information. You can view our Series 7 offerings here.

 

And for more helpful securities exam-related content, study tips, and industry updates, join the Solomon email list. Click the button below:

Big Changes Ahead for the Series 7 Exam

At the FINRA annual conference in May in Baltimore, FINRA announced that it is in what sounds like the final stages of a substantial revision to the Series 7 Continue reading

At the FINRA annual conference in May in Baltimore, FINRA announced that it is in what sounds like the final stages of a substantial revision to the Series 7 General Securities Representative Exam. The new Series 7 exam will test five major job functions, down from the current seven. Within the five major job functions, the revised Series 7 exam will test 29 tasks associated with the major job functions of a registered representative. According to the FINRA, the new Series 7 exam will contain “200+ knowledge statements” associated with the five functions and the 29 tasks.

The five job functions of the new Series 7 General Securities Representative Exam will be:

“Seeks business for the broker-dealer through customers and potential customers”

“Evaluates customers’ financial status, financial needs and risk tolerance, and helps them identify their investment objectives”

“Opens accounts, transfers assets and maintains appropriate account records”

“Provides customers with information on investments and makes suitable recommendations”

“Obtains and verifies customer’s purchase and sales instructions, enters orders and follows up”

These five functions are the same or substantially similar to ones on the current Series 7 exam. A notable change from the existing Series 7 exam is the addition of evaluating customer “risk tolerance.”

Removed or merged into other categories are:

“Explains the organization, participants, and functions of various securities markets and the principal factors that affect them”

“Monitors the customer’s portfolio and makes recommendations consistent with changes in economic and financial conditions as well as the customer’s needs and objectives”

The revised Series 7 will still be 250 questions long with an additional ten non-scored “pre-test” questions that will be randomly distributed on the exam. The revised Series 7 exam will remain six hours in length, broken into two three-hour segments.

Although no specific timeline was provided, the FINRA announcement said that the new Series 7 content outline would be submitted to the SEC first and then once the SEC approves the proposed changes, the new content outline would be posted on the FINRA web site and then some time after that the test would be launched at the testing centers.