Posted by: Mark Sanchiro, Senior Securities Editor
Published: March 27, 2018
In October 2017, the SEC approved a proposed rule change to restructure FINRA’s representative-level qualification examination programs. The rule change, effective October 1, 2018, restructures the examination programs into a new format, whereby all new representative-level applicants will be required to take a general knowledge examination, the Securities Industry Essentials (SIE) exam, and a tailored, specialized knowledge examination (a revised representative-level qualification examination) for their particular registered role.
As part of the 2018 restructuring process, FINRA has reviewed the General Securities Representative Qualification Examination (Series 7) and has proposed to move the general securities knowledge currently covered in the examination to the Securities Industry Essentials (SIE) exam, and create a tailored Series 7 examination. The new Series 7, as proposed to the SEC, will test knowledge relevant to the day-to-day activities, responsibilities, and job functions of general securities representatives.
Number of Questions—The proposed revised exam consists of 125 multiple-choice questions (reduced from 250), and each question consists of four answer choices. Each candidate’s exam includes 10 additional, unidentified pretest questions that do not contribute toward the candidate's score. The pretest questions are randomly distributed throughout the exam. Therefore, each candidate will see a total of 135 questions (125 scored and 10 unscored).
Allowed Time to Complete Exam—Candidates will be allowed 3 hours and 45 minutes (reduced from 6 hours) to complete the Series 7 exam.
Scoring—FINRA notes that all candidate test scores will be placed on a common scale using a statistical adjustment process known as equating. Equating scores to a common scale will account for the slight variations in difficulty that may exist among the different sets of exam questions a candidate receives. This allows for a fair comparison of scores and ensures that every candidate is held to the same passing standard regardless of which set of exam questions they received.
Content Outline—FINRA is also proposing to make changes to the major job functions that are performed by a General Securities (Series 7 licensed) Representative. The following are the revised job functions (1 through 4) with the associated number of questions:
|Function Description||% of Exam||# of Questions|
|1 - Seeks Business for the Broker Dealer from Customers and Potential Customers||7%||9|
|2 - Opens Accounts after Obtaining and Evaluating Customers' Financial Profile and Investment Objectives||9%||11|
|3 - Provides Customers with Information About|
Investments, Makes Suitable Recommendations,
Transfers Assets and Maintains Appropriate Records
|4 - Obtains and Verifies Customers’ Purchase and Sales|
Instructions and Agreements; Processes, Completes
and Confirms Transactions
Within each function, the questions on the revised Series 7 examination will place emphasis on “tasks.” There are two tasks (1.1–1.2) associated with Function 1, four tasks (2.1–2.4) associated with Function 2, four tasks (3.1–3.4) associated with Function 3, and four tasks (4.1–4.4) associated with Function 4.
For example, one such task (Task 1.1) is specified as: Contacts current and potential customers in person and by telephone, mail and electronic means; develops promotional and advertising materials and seeks appropriate approvals to distribute marketing materials.
Further, the content outline lists the knowledge required to perform each function and associated tasks (e.g., Standards and required approvals of public communications) and lists the laws, rules, and regulations a candidate is expected to know to perform each function and associated tasks (e.g., FINRA Rule 2210—Communications with the Public).
Looking for more information? The introduction of the SIE exam will also have an effect on Series 6, 79, and 99. Learn more about the changes coming to these exams in this article.
After identifying nine series exams with common content (6, 7, 22, 57, 79, 82, 86/87, 99), FINRA has decided to restructure their licensing process next year. The common content will be tested in the new Securities Industry Essentials (SIE) exam. Download this free guide to learn more about how the new securities licensing process will work, the rationale for the change, proposed SIE exam content, and how it could change hiring and recruiting practices.