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How to Become a Licensed Stockbroker

By: Kaplan Financial Education
March 20, 2020
Stockbroker license conceptual photo

If you’re majoring in finance or a related degree, or you are working in the financial sector, you might be considering a career as a stockbroker. Buying and selling stock and other securities on behalf of clients is a rewarding and gratifying profession, but it requires at least two licenses. This article explains each stockbroker license and then walks you through the process of how to become a licensed stockbroker.

Stockbroker License Overview

Technically, there are only two licenses that are absolutely required for stockbrokers. However, your employer might require or recommend that you earn others as part of your responsibilities. Here’s a rundown of them all:

  • Series 7: Administered by FINRA and known as the general securities representative license, this authorizes you to sell virtually any type of individual security, such as preferred stocks, options, bonds, and other individual fixed income investments—plus all forms of packaged products. Basically, this license enables you to sell everything except commodities futures, real estate, and life insurance.
  • Series 63: Administered by NASAA, Series 63 is known as the Uniform Securities Agent license. Along with the Series 7 license, you must hold this license to do business as a stockbroker or sell mutual funds in many states.
  • Series 3: If your employer wants you to sell commodity futures contracts, you need this license, also administered by FINRA.
  • Series 31: To sell managed futures, which are pooled groups of commodities futures, you’ll need this license, an offshoot of the Series 3 license.
  • Series 65: Financial planners or advisors who work for an hourly fee rather than a commission and stockbrokers and other financial representatives who deal with managed-money accounts need this license. It’s also administered by NASAA.
  • Series 66: If you have a Series 7 license, you have already been tested on a good portion of the topics covered on the Series 65 exam. Therefore, Series 66 rolls Series 63 and Series 65 content into one license so you don’t have earn the others separately.

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The Steps to Becoming a Licensed Stockbroker Here’s what you need to do to become a licensed stockbroker:

  1. Sit for and pass the SIE exam. The SIE exam tests common topics such as fundamentals, regulatory agencies and their functions, product knowledge, and acceptable and unacceptable practices. You can take the SIE exam before being sponsored by a firm and even while you are still in school. Note that although you have to pass both the SIE and Series 7 exams to get your Series 7 license, you can take them in any order.
  2. Secure sponsorship with a licensed firm. Once you’ve passed the SIE exam and you’re employed, your firm must file a Uniform Application for Securities Industry Registration or Transfer, also known as Form U4, to enable you to earn your Series 7 license.
  3. Register for the Series 7 exam. Your sponsoring broker is required to file an application for you through FINRA’s CRD system. FINRA’s approval of that application opens a 120-day testing window. FINRA suggests you schedule your exam as far in advance as possible to ensure you get your desired date.
  4. Study for and pass the Series 7 exam. The Series 7 exam is not exactly a walk in the park. Study with purpose and planning. Exam preparation and review courses go a long way toward helping you pass your Series 7 exam the first time. The exam consists of 125 multiple-choice questions, and you have 3 hours and 45 minutes to complete it. The passing score is 72 percent.
  5. Register for the Series 63 exam. The Series 63 exam does not require member firm sponsorship. You can use Form U10 to apply for the Series 63 exam if you are not sponsored.
  6. Study for and pass the Series 63 exam. Prepare for the Series 63 exam in the same way you prepared for the Series 7 exam. Consider exam preparation and review packages to improve your chances of passing. The Series 63 has 65 questions and lasts for 75 minutes. The passing score is 73 percent.
  7. Register, study for, and pass additional exams. Either find out from your employer or decide for yourself any other licenses you need to earn, and then prepare for them like you did for Series 7 and Series 63.

Additional Tips for Success

If you want to become a licensed stockbroker, here are some extra tips to help you succeed:

  • If you are still in college or are about to enter college, consider majoring in financial planning, business, finance, economics, or accounting as an undergraduate and possibly continue these studies in graduate school.
  • Complete an internship. Many brokerage firms and investment banks accept summer interns. Internships help you understand the career and, in some cases, they can serve as an extended job interview.
  • Find a job in a brokerage, asset management firm, or bank. Because you can’t register for the Series 7 exam without a sponsor, you need to be employed before you take the exam.
  • Make sure you can pass a background check, which typically consists of a credit check and a criminal background search. Many employers will use these checks as a condition of employment.
  • As part of your study plan for each license exam and the SIE exam, take a practice exam after you’ve read the materials and answered practice questions. A practice exam closely replicates the degree of difficulty, weighting, and format of the real exam, and you receive a score with diagnostic feedback. The better you perform on a practice exam, the greater your likelihood of passing your licensing exams.
  • Stay calm on exam day. Plan to arrive at the testing center more than 30 minutes beforehand so that you have plenty of time to check in, find where you are supposed to go, and collect your thoughts. During the exam, take the questions one at a time and don’t look ahead to others or second-guess yourself.

Ready to Get Started on the Path to Becoming a Licensed Stockbroker?

Exam preparation packages for the SIE, Series 7, and Series 63 can help increase your odds of passing these critical exams on your way to becoming a licensed stockbroker.

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