Free Series 7 Practice Exam

What’s on the Series 7

• Function 1: Seeks Business for the Broker-Dealer from Customers and Potential Customers7%

  • Client contact and promotional communications

    Reps must follow rules on how they reach out to current and prospective customers (calls, mail, electronic, seminars) and secure the required approvals before distributing marketing or advertising materials, including product-specific rules for variable products, options, municipal securities, and CMOs.

  • Describing products and new issues to solicit business

    Covers how new securities come to market (registration process, prospectus, underwriting and syndicate mechanics), restrictions on soliciting IPOs, and the exemptions from registration (Regulation D, Regulation A, private placements) reps need to understand when pitching products to prospects.

• Function 2: Opens Accounts After Obtaining and Evaluating Customers' Financial Profile and Investment Objectives9%

  • Account types and disclosures

    Reps must know the range of account structures (individual, joint, retirement, margin, discretionary, day-trading) and the disclosures required when opening or changing them.

  • Customer identification and documentation

    Involves collecting and verifying required identity and legal documents (CIP, KYC, powers of attorney, trust paperwork) and recognizing and escalating suspicious activity.

  • Investment profile and suitability

    Gathering the financial and personal information (holdings, income, objectives, risk tolerance) needed to judge whether a recommendation fits the customer's circumstances.

  • Supervisory approval to open accounts

    Understanding the internal review and sign-off required before an account can be opened or certain activity permitted.

• Function 3: Provides Customers with Information About Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records73%

  • Investment analysis and market communication

    Explaining investment strategies, risks and rewards, and using financial-statement analysis (ratios, EPS, cash flow) to support recommendations.

  • Product knowledge across security types

    The largest tested area, spanning equity securities, packaged products (mutual funds, ETFs, variable annuities, REITs, direct participation programs), options strategies, and debt instruments (corporate, municipal, Treasury, agency, and asset-backed securities).

  • Required disclosures on products and costs

    Informing customers of the risks, fees, expenses, and tax treatment tied to specific investment products and transactions.

  • Account communication and recordkeeping

    Handling confirmations, statements, account transfers, and the books-and-records retention obligations tied to customer accounts.

• Function 4: Obtains and Verifies Customers' Purchase and Sales Instructions and Agreements; Processes, Completes and Confirms Transactions11%

  • Quotes and order types

    Understanding quote types, the range of order types, short-sale requirements, and best-execution obligations.

  • Trade processing and settlement

    Covers order tickets, market-making activity, regulatory trade-reporting systems, and delivery/settlement requirements.

  • Error and dispute resolution

    Handling erroneous trades and customer complaints, including the applicable reporting requirements.

  • Margin

    Margin account rules, initial and maintenance requirements, and Regulation T credit requirements.