FINRA Series 7 Practice Test & Mock Exam

Series 7 rewards candidates who can handle representative-level client discovery, make product recommendations that fit the facts, and move orders and transactions through the rule framework without missing a step. If you are searching for Series 7 sample questions, a practice test, mock exam, or simulator, this is the main Securities Prep page to start on web and continue on iOS or Android with the same account. This page includes 24 sample questions with detailed explanations so you can try the exam style before opening the full app question bank.

Interactive Practice Center

Start a practice session for Series 7 below, or open the full app in a new tab. For the best experience, open the full app in a new tab and navigate with swipes/gestures or the mouse wheel—just like on your phone or tablet.

▶ Click to Load Interactive App

Open Full App in a New Tab

A small set of questions is available for free preview. Subscribers can unlock full access by signing in with the same account they use on web and mobile.

Prefer to practice on your phone or tablet? Download the Securities Prep app:

Scan for iOS (United States)

Scan for Android (United States)

• iOS: United States · Canada
• Android: United States · Canada

If you already subscribed on web or mobile, sign in with the same account here to continue on desktop.

Free diagnostic: Try the 125-question Series 7 full-length practice exam before subscribing.

What this Series 7 practice page gives you

• a direct route into the Securities Prep simulator for Series 7
• 24 sample questions with detailed explanations across the main Series 7 topic buckets
• targeted practice around account opening, product risk tradeoffs, recommendations, orders, and settlement workflow
• detailed explanations that show why the strongest representative response is the most defensible
• a clear free-preview path before you subscribe
• the same subscription across web and mobile

Series 7 exam snapshot

• Provider: FINRA
• Exam: General Securities Representative Qualification Exam
• Practice reference: 125 practice questions in 225 minutes
• Registration context: generally paired with the SIE

Topic coverage for Series 7 practice

• Client setup: account opening, financial profile review, and investment-objective context
• Recommendation decisions: product fit, product risk tradeoffs, and recordkeeping around recommendations
• Transaction workflow: order handling, processing, confirmation, and settlement-sensitive decisions

What Series 7 is really testing

Series 7 is primarily a representative-level recommendation-and-workflow exam:

• identifying what the client is actually trying to achieve before recommending a product
• matching risk, liquidity, tax treatment, and time horizon to the right security or account type
• distinguishing product features that look similar but lead to different suitability results
• understanding when a recommendation, order, or account change becomes a documentation or compliance problem
• choosing the answer that best protects the customer and still fits the rules of the transaction

Common question styles

• What is the strongest recommendation?: product fit, account type, order type, or allocation decision
• Which client fact matters most?: age, time horizon, income need, tax status, liquidity need, or experience
• What is the rule trigger?: margin, settlement, confirmation, prospectus delivery, communication, or AML concern
• What changed the answer?: call feature, sales charge, tax treatment, order instruction, or registration type
• What is the best next step?: disclose, document, reject the order, escalate, or proceed correctly

High-yield pitfalls

• recommending the product with the highest yield without checking liquidity or suitability
• confusing a product’s tax advantage with a guarantee of overall fit
• missing the difference between a cash-account rule and a margin-account rule
• overlooking the order instruction or settlement detail that changes the answer
• choosing a generally plausible recommendation that still ignores a client constraint
• focusing on product trivia while missing a customer-account or communication red flag

How to use the Series 7 simulator efficiently

1. Start with account-opening and recommendation drills so the representative workflow becomes automatic.
2. Review every miss until you can explain which client fact, product feature, or rule changed the answer.
3. Move into mixed sets once you can switch between recommendations, orders, and transaction scenarios without losing pace.
4. Finish with timed runs so the 225-minute pace feels comfortable.

Free preview vs premium

• Free preview: 24 public sample questions on this page plus the web app entry so you can validate the question style and explanation depth.
• Premium: the full Series 7 practice bank, focused drills, mixed sets, timed mock exams, detailed explanations, and progress tracking across web and mobile.

Free samples and full bank

• Live now: this exact practice route is available in Securities Prep on web, iOS, and Android.
• On-page sample set: this page includes 24 public sample questions from the current practice coverage.
• Full app: open the Securities Prep web app or mobile app for broader timed coverage.

Free review resources

Use these free SecuritiesMastery.com resources for concept review, then return to this page when you are ready to practice in Securities Prep.

• Series 7 Cheat Sheet
• Series 7 Study Guide

Focused sample questions

Use these focused Series 7 sample-question pages when you want to isolate one official topic area before returning to the mixed simulator.

• Broker-Dealer Business Development
• Customer Accounts
• Investment Recommendations
• Order Handling
• Free Series 7 Full-Length Practice Exam

24 Series 7 sample questions with detailed explanations

These sample questions cover multiple blueprint areas for Series 7. Use them to check your readiness here, then move into the full Securities Prep question bank for broader timed coverage.

Question 1

Topic: Function 3 — Provides Customers with Information About Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records

Which statement best describes flow-through taxation for a direct participation program (DPP) and why its tax reporting is often complex?

• A. The DPP generally does not pay entity-level income tax; each investor reports their share of taxable items, often detailed on a Schedule K-1
• B. The DPP’s distributions are generally tax-free because the partnership is a tax-exempt entity
• C. The DPP pays corporate income tax, and investors are taxed only on cash distributions
• D. The DPP withholds taxes on behalf of investors and issues a single Form 1099-INT

Best answer: A

Explanation: Flow-through taxation means the DPP itself generally is not taxed as a separate entity for income tax purposes. Instead, investors are allocated their share of income, losses, deductions, and credits and must report them on their own returns. That allocation is commonly reported on Schedule K-1, which can be complex because it breaks out multiple tax categories and allocations.

Question 2

Topic: Function 4 — Obtains and Verifies Customers’ Purchase and Sales Instructions and Agreements; Processes, Completes and Confirms Transactions

A customer is opening a margin account online and asks the registered representative what the required margin disclosures mean in practical terms. Which statement is INCORRECT about a margin account?

• A. The firm may charge interest on borrowed funds
• B. Losses are limited to the cash initially deposited
• C. Securities may be pledged as collateral for the loan
• D. The firm may liquidate securities to meet a margin call

Best answer: B

Explanation: Margin accounts involve borrowing against securities, which increases both potential gains and potential losses. Because the customer can lose more than the original deposit and still owe the firm money, any disclosure implying losses are capped at the initial deposit is wrong. Required margin disclosures emphasize borrowing costs and the firm’s rights if equity declines.

Question 3

Topic: Function 3 — Provides Customers with Information About Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records

Which statement best describes a mutual fund 12b-1 fee and why it matters to a long-term investor?

• A. A one-time sales charge paid to a broker at purchase that lowers the initial amount invested
• B. A redemption fee paid back to the fund on short-term trades to discourage market timing
• C. An ongoing annual fund expense used for distribution/marketing that reduces net returns over time
• D. An insurance charge in variable annuities for mortality and expense risk that is separate from fund expenses

Best answer: C

Explanation: A 12b-1 fee is an ongoing annual expense that a mutual fund may charge to pay for distribution and marketing. Because it is deducted from fund assets each year, it lowers the investor’s net return. Over long holding periods, even small annual fees can significantly reduce the ending value due to compounding.

Question 4

Topic: Function 3 — Provides Customers with Information About Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records

Which statement correctly differentiates American-style options from European-style options regarding exercise timing?

• A. European-style options may be exercised any time up to expiration
• B. European-style options may be exercised only up to the settlement date
• C. American-style options may be exercised only at expiration
• D. American-style options may be exercised any time up to expiration

Best answer: D

Explanation: Exercise timing is the key distinction between American-style and European-style options. American-style options allow the holder to exercise on any business day up to and including expiration. European-style options restrict the holder to exercising only on the expiration date.

Question 5

Topic: Function 4 — Obtains and Verifies Customers’ Purchase and Sales Instructions and Agreements; Processes, Completes and Confirms Transactions

A customer is considering trading a new corporate bond issue on a “when-issued” basis. The customer asks what the phrase “as and if issued” means in a when-issued trade.

Which choice best matches this concept?

• A. The trade is conditional on the securities being issued
• B. The trade must be fully paid on the trade date
• C. The trade can be canceled only by the customer
• D. The trade guarantees delivery on regular-way settlement

Best answer: A

Explanation: When-issued trading allows investors to buy or sell securities before the new issue is delivered. “As and if issued” indicates the contract is contingent on the securities actually being issued; if the offering is delayed or canceled, the trade does not settle as originally contracted. This is a key disclosure point for customers trading WI securities.

Question 6

Topic: Function 3 — Provides Customers with Information About Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records

A customer owns 100 ABC warrants, each giving the right to buy 1 share of ABC at $40 per share, expiring in 18 months. ABC announces a 2-for-1 stock split effective next month, and the warrant agreement includes standard anti-dilution protection for stock splits and stock dividends. The customer wants to keep the same upside exposure but does not want to pay $4,000 to exercise now. What is the best recommendation?

• A. Sell the warrants before the split because the split will dilute warrant value
• B. Hold the warrants; the split should adjust the warrant terms so the economic exposure is unchanged
• C. Buy ABC shares now and allow the warrants to expire to avoid dilution risk
• D. Exercise the warrants before the split to lock in the $40 purchase price

Best answer: B

Explanation: Warrants with anti-dilution protection for stock splits are adjusted so holders are not economically harmed by the split. After a 2-for-1 split, the exercise price is typically reduced and/or the number of shares per warrant is increased so the overall value of the warrant position is preserved. Since the customer wants to avoid paying the exercise cost now, holding the warrants best fits the stated constraints.

Question 7

Topic: Function 3 — Provides Customers with Information About Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records

A customer wants to invest money needed for a home down payment in about 12 months. To “reduce risk,” she plans to buy a low-cost ETF that tracks a broad U.S. stock index and holds hundreds of stocks across many industries.

Which option states the primary risk/limitation that still matters most for this setup?

• A. The ETF’s price will not fluctuate much because it holds many stocks
• B. Diversification eliminates the risk that any holding will go bankrupt
• C. A broad market decline can still reduce the ETF’s value
• D. The customer faces significant default risk from the ETF’s issuer

Best answer: C

Explanation: A broad index ETF is highly diversified, so it can reduce nonsystematic (issuer-specific) risk by spreading exposure across many companies. However, the portfolio is still exposed to systematic risk—overall equity market declines—which diversification cannot remove. With a short 12-month horizon, that market risk is a key limitation for meeting the down-payment goal.

Question 8

Topic: Function 3 — Provides Customers with Information About Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records

A customer expects a big price move in ABC after earnings but is unsure of direction. The registered representative recommends buying a 1-month ABC 50 straddle: buy 1 ABC 50 call for $2.40 and buy 1 ABC 50 put for $2.10 (premiums are per share; ignore commissions). ABC is currently trading at $49.20.

What are the straddle’s breakeven stock prices at expiration?

• A. $53.70 and $44.70
• B. $52.40 and $47.60
• C. $50.30 and $49.70
• D. $54.50 and $45.50

Best answer: D

Explanation: A long straddle is used when an investor expects higher volatility and wants to profit from a large move up or down. The total premium paid is added to the strike for the upside breakeven and subtracted from the strike for the downside breakeven. Here, the total premium is $4.50, so the breakevens are $54.50 and $45.50.

Question 9

Topic: Function 3 — Provides Customers with Information About Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records

A registered representative is reviewing a stock’s dividend sustainability with a customer. The company reported the following for the most recent fiscal year (USD):

Rounded to the nearest whole percent, which statement best describes the company’s dividend payout ratio?

• A. 40%; paid 40% of earnings as dividends
• B. 250%; paid 250% of earnings as dividends
• C. 60%; paid 60% of earnings as dividends
• D. 40%; retained 40% of earnings after dividends

Best answer: A

Explanation: Dividend payout ratio measures the portion of earnings distributed to shareholders as dividends. Using the figures provided, divide dividends per share by earnings per share and convert to a percentage. This shows how much of the company’s profits are being returned to shareholders versus retained in the business.

Question 10

Topic: Function 3 — Provides Customers with Information About Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records

A customer owns a deferred variable annuity and sees “accumulation units” on her current statement. She plans to annuitize in about 18 months and wants payments that can rise or fall with the separate account’s performance. She asks how the units shown now relate to her contract value today and to the payments she will receive after annuitization.

Which explanation by the registered representative is the best response?

• A. Annuity units are used only during accumulation to value the contract
• B. Accumulation units track contract value; annuity units determine payout amounts
• C. Accumulation units lock in a fixed payment amount at annuitization
• D. Unit prices stop changing after annuitization, so payments stay level

Best answer: B

Explanation: In a deferred variable annuity, contract value during the accumulation phase is based on accumulation units and their unit value. When the contract is annuitized, the insurer converts that value into annuitization (annuity) units, and each payment is based on the number of annuity units and the current annuity unit value. Because the annuity unit value can change, payments can fluctuate with performance.

Question 11

Topic: Function 4 — Obtains and Verifies Customers’ Purchase and Sales Instructions and Agreements; Processes, Completes and Confirms Transactions

A customer opens a margin account and signs the firm’s margin agreement and margin risk disclosure electronically. After a sharp market drop, the account’s equity falls below the firm’s maintenance requirement. The customer is unreachable, so the firm sells securities in the account that same day to bring the account back into compliance.

Which statement best matches what margin disclosures typically state about the firm’s rights in this situation?

• A. The firm must provide a guaranteed waiting period after a maintenance call
• B. The firm must obtain the customer’s permission before selling any securities
• C. The firm may sell securities without prior notice to meet margin requirements
• D. The customer can require the firm to sell only positions the customer selects

Best answer: C

Explanation: A key margin-account disclosure is that the firm can protect itself as lender by liquidating securities without first contacting the customer when margin requirements aren’t met. Because the account fell below maintenance and the customer was unreachable, the firm’s same-day liquidation is consistent with those disclosed rights.

Question 12

Topic: Function 3 — Provides Customers with Information About Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records

Which statement about the taxation of taxable (non-municipal) bonds is most accurate?

• A. If a taxable bond is purchased at a premium, the entire premium is deductible as a capital loss in the year of purchase.
• B. Coupon interest on a corporate bond is taxed as long-term capital gain if the bond is held for more than one year.
• C. Any gain when a taxable bond is sold above cost is taxed as ordinary interest, not as capital gain.
• D. Original issue discount (OID) is generally taxed as ordinary interest income as it accrues, even if no cash is received until maturity.

Best answer: D

Explanation: Taxable bond coupon interest is generally ordinary income, while price changes can create capital gain or loss when the bond is sold or redeemed. A key exception to “cash received” is original issue discount (OID), which is typically taxed as ordinary interest as it accrues even if the investor receives no periodic cash payments.

Question 13

Topic: Function 4 — Obtains and Verifies Customers’ Purchase and Sales Instructions and Agreements; Processes, Completes and Confirms Transactions

A customer’s Reg T margin account statement shows an SMA (Special Memorandum Account) credit of $10,000 after a recent market increase. The customer requests a $4,000 cash withdrawal and asks how it will affect margin buying power for additional purchases of marginable stocks.

Which response by the registered representative best reflects standard firm practice and margin mechanics?

• A. The withdrawal uses SMA dollar-for-dollar; SMA becomes $6,000 and buying power is about $12,000.
• B. SMA is not affected by withdrawals; it only changes when securities are bought or sold.
• C. Market declines will reduce SMA, so buying power cannot be estimated from SMA.
• D. Buying power for marginable stocks equals the remaining SMA, so it would be $6,000.

Best answer: A

Explanation: SMA is a credit balance created by excess equity in a margin account and can be used for purchases or withdrawals. When the customer withdraws cash, SMA is reduced dollar-for-dollar. Because initial margin on marginable stocks is typically 50%, the customer’s margin buying power is generally about twice the SMA remaining after the withdrawal.

Question 14

Topic: Function 3 — Provides Customers with Information About Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records

A customer who owns shares of a public company asks how her rights as a common stockholder compare with those of the company’s bondholders. Which statement by the registered representative best reflects a fair, balanced explanation of these rights?

• A. Bondholders generally vote on directors and major corporate policies, while common stockholders do not vote.
• B. Common stockholders typically can vote for directors, may receive dividends only if declared, and have a residual claim after bondholders in liquidation.
• C. Common stockholders are entitled to dividends each quarter, while bondholders receive interest only if the company has profits.
• D. In a bankruptcy, common stockholders are paid before bondholders because they are the company’s owners.

Best answer: B

Explanation: Common stockholders generally have voting rights and may receive dividends if the board declares them. However, common stock is junior in the capital structure, so stockholders have a residual claim on assets and are paid after creditors, including bondholders, in a liquidation. Bondholders have contractual interest and principal claims that are senior to equity.

Question 15

Topic: Function 3 — Provides Customers with Information About Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records

A registered representative is discussing a 15-year municipal general obligation (GO) bond with a conservative customer. The bond is rated A-, but the customer mentions a news report that a major local employer is relocating out of the city and asks if the GO pledge is still “strong.”

Before making a recommendation, what is the best next step?

• A. Enter the order now and research credit before settlement
• B. Rely on the A- rating as sufficient proof of credit quality
• C. Review the official statement for tax base and debt burden trends
• D. Focus only on coupon, call features, and yield-to-maturity

Best answer: C

Explanation: For a GO bond, the key credit question is the issuer’s ability and willingness to levy taxes to pay debt service. With potentially weakening local economics, the representative should review the issuer’s official statement and related financial disclosures to evaluate tax base strength and debt burden before recommending the bond. This is the appropriate sequencing step before any execution.

Question 16

Topic: Function 3 — Provides Customers with Information About Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records

A customer wants to move a margin brokerage account from Firm A to Firm B and asks how the Automated Customer Account Transfer Service (ACATS) works. Which statement about an ACATS transfer is NOT accurate?

• A. The customer typically signs a transfer request at the receiving firm
• B. The receiving firm initiates the transfer request through ACATS
• C. Eligible securities can usually be transferred in kind rather than liquidated
• D. The delivering firm may reject the transfer solely to retain the customer

Best answer: D

Explanation: ACATS transfers are generally initiated by the receiving broker-dealer after the customer authorizes the request. The delivering firm must either validate the request or identify a legitimate exception, and most eligible positions can move in kind. A firm cannot block a transfer just to prevent the customer from leaving.

Question 17

Topic: Function 1 — Seeks Business for the Broker-Dealer from Customers and Potential Customers

A broker-dealer is part of an underwriting syndicate for an IPO. The issuer’s registration statement has been filed, but it is not yet effective (the cooling-off period). A retail customer calls and asks to “buy 1,000 shares in the IPO right now” and wants information about the deal. Which response by the registered representative best complies with offering-communications standards?

• A. Provide the preliminary prospectus and, if the customer wants, record a nonbinding indication of interest
• B. Decline to discuss the offering until after effectiveness, when sales literature can be used freely
• C. Email a deal summary to other customers highlighting expected first-day trading gains
• D. Accept the order and collect payment, but label it “pending effectiveness”

Best answer: A

Explanation: In the cooling-off period, the offering cannot be completed yet, so communications must avoid a binding sale. Providing a preliminary prospectus is generally permitted, and a customer may express interest through a nonbinding indication of interest. Orders and payments must wait until the registration statement is effective.

Question 18

Topic: Function 2 — Opens Accounts After Obtaining and Evaluating Customers’ Financial Profile and Investment Objectives

A customer has an individual brokerage account and just got married. She wants to “add my spouse to the account” so both can place trades online and have survivorship rights, and she wants all current positions moved over in-kind without selling anything.

Which option states the primary limitation/risk the registered representative should address first?

• A. Adding an owner reduces SIPC protection on the account
• B. Re-registration requires new joint paperwork and both owners’ signatures
• C. A journal transfer will be delayed by T+1 settlement
• D. A recorded phone call is sufficient to change the registration

Best answer: B

Explanation: Adding another owner is a change in account registration and legal ownership, not a simple profile update. Firms typically require opening the new registration (e.g., a joint account) and obtaining properly executed documentation (new account form and signed re-registration/journal instructions) before transferring positions. The key tradeoff is speed versus completing required paperwork and approvals.

Question 19

Topic: Function 4 — Obtains and Verifies Customers’ Purchase and Sales Instructions and Agreements; Processes, Completes and Confirms Transactions

In a long margin account, a customer’s equity is computed as the market value of long securities minus the debit balance. For this question, consider the account to have “excess equity” if equity is greater than zero.

A customer’s account shows a market value of long securities of $50,000 and a debit balance of $32,000. Which choice correctly matches this account feature (equity) and its result?

• A. Equity is $18,000 and the account does not have excess equity
• B. Equity is $25,000 and the account has excess equity
• C. Equity is $18,000 and the account has excess equity
• D. Equity is $82,000 and the account has excess equity

Best answer: C

Explanation: Equity in a long margin account is the value of the long securities minus the debit balance. Here, $50,000 − $32,000 = $18,000. Because the result is greater than zero, the account has excess equity under the question’s definition.

Question 20

Topic: Function 3 — Provides Customers with Information About Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records

Which statement is most accurate about disclosure timing and availability for municipal securities?

• A. Because EMMA posts official statements, broker-dealers do not need to send an official statement to a customer who buys a new-issue municipal bond.
• B. Continuing disclosure filings for municipal issuers are provided only to regulators and are not available to retail investors through EMMA.
• C. A municipal official statement must be delivered to customers before the trade is executed in both the primary and secondary markets.
• D. For most new-issue municipal purchases, the final official statement must be sent to the customer no later than settlement, and it is publicly available on EMMA.

Best answer: D

Explanation: Municipal official statements are a primary-market disclosure document for new issues. At a high level, customers must receive the final official statement by settlement, and EMMA serves as a public repository where official statements and continuing disclosure filings can be accessed. This aligns disclosure delivery timing with the completion of the transaction.

Question 21

Topic: Function 3 — Provides Customers with Information About Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records

A customer is reviewing a company research report and asks you to estimate the issuer’s shareholders’ equity using the balance-sheet snapshot below. Based on the exhibit, what is shareholders’ equity (rounded to the nearest $0.1 million)?

Exhibit: Balance-sheet snapshot (USD, millions)

• A. Approximately $2.5 million
• B. Approximately $5.9 million
• C. Approximately $3.5 million
• D. Approximately $14.3 million

Best answer: A

Explanation: Shareholders’ equity represents the residual claim after liabilities are paid. First total the assets by adding current and noncurrent assets, then subtract total liabilities. Using the exhibit, equity is \((3.5 + 4.9) - 5.9 = 2.5\) million.

Question 22

Topic: Function 3 — Provides Customers with Information About Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records

A customer is comparing two publicly traded companies in the same industry. Both report under similar accounting policies and have similar financial leverage.

Company A reports return on common equity (ROE) of 16%, while Company B reports ROE of 10%.

Which statement best matches what the higher ROE suggests?

• A. Company A’s stock must be trading at a lower price-to-earnings ratio
• B. Company A generates more net income per dollar of common shareholders’ equity
• C. Company A must pay a higher dividend yield to shareholders
• D. Company A has a lower debt-to-equity ratio than Company B

Best answer: B

Explanation: ROE compares a company’s net income to its common shareholders’ equity. With similar accounting and leverage, the company with the higher ROE is using common equity more profitably, which can suggest stronger operating performance and competitiveness within its industry.

Question 23

Topic: Function 4 — Obtains and Verifies Customers’ Purchase and Sales Instructions and Agreements; Processes, Completes and Confirms Transactions

A customer brings in physical ABC Corp 5% bonds due 2034 to sell. The issue is registered and was originally issued only in $1,000 denominations. Your firm will accept the bonds for sale only if they are in “good delivery” form.

Which delivery would meet the good delivery requirement?

• A. Ten $1,000 bonds registered to Jane Q. Public, not endorsed
• B. One $10,000 bond registered to Jane Q. Public, properly endorsed
• C. Ten $1,000 bonds registered to Jane Q. Public, properly endorsed
• D. Ten $1,000 bonds registered JTWROS, endorsed by one owner only

Best answer: C

Explanation: Good delivery requires securities to be in negotiable form: correct denomination for the issue, proper registration/assignment, and proper endorsements (typically with a signature guarantee when required by firm practice). Since these bonds are issued only in $1,000 denominations and are registered, the acceptable delivery is the set of $1,000 bonds registered to the customer and properly endorsed.

Question 24

Topic: Function 1 — Seeks Business for the Broker-Dealer from Customers and Potential Customers

A registered representative is discussing a new issue of corporate notes being distributed as an unregistered offering. The notes will be sold in the U.S. as Rule 144A securities. A customer that is an investment adviser managing about $80 million in securities for clients asks to purchase the notes as soon as allocations are available. What is the best next step for the representative?

• A. Have the customer complete an accredited investor questionnaire and subscription agreement
• B. Tell the customer the notes must be registered with the SEC before purchase
• C. Submit the order immediately and deliver the offering memorandum after allocation
• D. Determine whether the customer is a QIB and obtain the required purchaser representation

Best answer: D

Explanation: Rule 144A is a resale safe harbor that permits trading of unregistered securities only with qualified institutional buyers (QIBs). Because the customer manages $80 million in securities, the representative must first determine whether the customer meets the QIB standard and obtain the appropriate representation before submitting the order. This is the correct workflow step before executing a 144A transaction.

Series 7 general securities map

Use this map after the sample questions to connect individual items to customer accounts, product selection, trading, margin, options, municipal securities, and suitability decisions these Securities Prep samples test.

    flowchart LR
	  S1["Customer request or market scenario"] --> S2
	  S2["Confirm customer facts and account authority"] --> S3
	  S3["Analyze product mechanics and risk"] --> S4
	  S4["Apply suitability margin options or order rule"] --> S5
	  S5["Disclose document and execute correctly"] --> S6
	  S6["Review follow-up and prohibited conduct"]

Quick Cheat Sheet

Mini Glossary

• Suitability: Assessment that a recommendation fits the customer profile and the representative’s obligations.
• Margin: Customer borrowing against securities, subject to disclosure, equity, and maintenance requirements.
• Options: Contracts giving a buyer rights and a writer obligations tied to an underlying asset.
• Municipal security: Security issued by a state, municipality, or related public authority.
• DPP: Direct participation program, often involving pass-through income, illiquidity, and tax considerations.

In this section

• Series 7: Broker-Dealer Business Development
  Try 10 focused Series 7 questions on Broker-Dealer Business Development, with explanations, then continue with the full Securities Prep practice test.
• Series 7: Customer Accounts
  Try 10 focused Series 7 questions on Customer Accounts, with explanations, then continue with the full Securities Prep practice test.
• Series 7: Investment Recommendations
  Try 10 focused Series 7 questions on Investment Recommendations, with explanations, then continue with the full Securities Prep practice test.
• Series 7: Order Handling
  Try 10 focused Series 7 questions on Order Handling, with explanations, then continue with the full Securities Prep practice test.
• Free Series 7 Full-Length Practice Exam: 125 Questions
  Try 125 free Series 7 practice questions across the official topic areas, with answers and explanations, then continue with the full Securities Prep question bank.