A Series 7 license allows you to solicit, recommend, buy, and sell most publicly traded securities on behalf of retail and institutional clients as a registered representative of a FINRA member broker-dealer. Formally the General Securities Representative Qualification, it is the broadest single product credential FINRA issues, and it carries with it the authority to open customer accounts, execute trades, and make personalized investment recommendations, all under your firm’s supervision and the SEC’s best-interest standard.
Securities You Can Sell
Under FINRA Rule 1220, the General Securities Representative registration covers the widest range of products available through any single FINRA qualification.1FINRA. FINRA Rule 1220 – Registration Categories With a Series 7, you can transact in:
- Common and preferred stock
- Corporate bonds and other debt instruments
- Open-end and closed-end mutual funds
- Exchange-traded funds
- Money market funds
- Equity options, subscription rights, and warrants
- U.S. Treasury bonds, notes, and bills
- Municipal securities issued by state and local governments
- Real estate investment trusts
- Certificates of deposit, collateralized mortgage obligations, and variable annuities
Narrower FINRA exams exist for specialized product categories, but the Series 7 is the generalist license that covers most of what a client is likely to hold.
What the Series 7 Does Not Authorize
The license is broad, but it is not universal. A few products a client might reasonably expect you to handle sit outside it:
- Commodity futures on oil, gold, agricultural products, and similar underlyings require a Series 3, administered through the National Futures Association.2FINRA. Qualification Exams
- Fixed annuities and life insurance are regulated by the states as insurance products and require a state insurance license, not a FINRA registration.
- Direct interests in physical real estate require a real estate license. REITs are securities and are covered by the Series 7; the underlying property is not.
Variable annuities and variable life insurance are the crossover case: they contain a securities component, so you need the Series 7 and a state insurance license to sell them.
What You Can Do for Clients Day to Day
The license authorizes more than product sales. As a registered representative you can open new customer accounts, which has to happen before any trading. You can solicit business by proactively contacting individual and institutional investors to recommend transactions. And you can enter and execute trades on a client’s behalf, from the initial order through settlement.
Personalized recommendations are the core of the job. Telling a client to buy a particular stock, sell a bond, or move from one mutual fund to another all fall within your authority. Every one of those recommendations is governed by a federal standard of conduct.
Regulation Best Interest
SEC Regulation Best Interest, known as Reg BI, replaced the older suitability rule and requires you to act in the retail customer’s best interest whenever you recommend a securities transaction or investment strategy.3FINRA. SEC Regulation Best Interest (Reg BI) The care obligation requires reasonable diligence, care, and skill: you need a reasonable basis to believe the recommendation fits the customer’s investment profile, taking into account the potential risks, rewards, and costs. Your financial interest cannot come ahead of the customer’s.4eCFR. 17 CFR 240.15l-1 – Regulation Best Interest
Reg BI also looks at patterns. A series of trades can violate the rule even when each individual recommendation appears defensible, if the overall trading volume is excessive relative to the customer’s situation.
Discretionary Accounts
Most trades will follow specific client instructions. You can, however, manage accounts on a discretionary basis, making trading decisions without approval for each transaction. FINRA Rule 3260 conditions that authority:5FINRA. FINRA Rule 3260 – Discretionary Accounts
- The customer must give prior written authorization to a specific individual.
- The firm must accept the discretionary account in writing.
- A designated manager must promptly approve each discretionary trade in writing.
- The firm must review discretionary accounts at frequent intervals to detect excessive trading relative to the account’s size and character.
You Have to Work Through a Broker-Dealer
A Series 7 is not something you can use on your own. You must be associated with a FINRA member broker-dealer for the registration to be active.6FINRA. Series 7 – General Securities Representative Exam The firm provides the trading infrastructure and, under FINRA Rule 3110, is legally obligated to maintain a supervisory system reasonably designed to keep its representatives in compliance with securities laws and FINRA rules.7FINRA. FINRA Rule 3110 – Supervision Leave the firm without joining another, and your registration goes inactive.
The everyday title most Series 7 holders use is “registered representative,” though “stockbroker” and “financial advisor” are common depending on the firm’s business model.
State Registration Adds Another Layer
The Series 7 is federal. Before you can sell to residents of a given state, that state generally requires you to pass its own law exam, often called a Blue Sky exam. The two most common are:
- The Series 63, the Uniform Securities Agent State Law Exam, covering state-level rules for agents.
- The Series 66, the Uniform Combined State Law Exam, which combines the Series 63 and the Series 65 (investment adviser law).
Which one you need depends on the state and on the services your firm offers.2FINRA. Qualification Exams States also charge their own annual registration fees, which vary by jurisdiction. Your firm will typically direct you to the exam you need.
Keeping the License Active
Continuing education is a condition of keeping the registration, not a formality. FINRA requires two components:8FINRA. Continuing Education (CE)
- The Regulatory Element, an annual online program covering significant rule changes, due by December 31 each year.
- The Firm Element, a training program your broker-dealer designs based on an annual needs analysis of its business and regulatory concerns.
If you leave your firm, you can preserve your qualification for up to five years without retesting, but only if you elect to participate in the continuing education program either when your Form U5 termination notice is filed or within two years of your termination date. Miss that window or fail to complete the required CE, and you lose the qualification and would have to sit for the exam again.9FINRA. FINRA Rule 1240 – Continuing Education