Stock Broker License – Do You Really Need one?

people taking the series 7 exam to become a stock broker

The Complete Stock Broker License Guide!

In order to receive your stock broker license, you’ll need to complete and pass two exams, they are the series 7 and 63.

Both tests are open to anyone and there are no citizenship requirements. Once you pass the Series 7, you’ll be licensed to work in any state. All state requirements are covered by the Series 63.

There are also no educational requirements. Meaning you don’t need a fancy degree or even a high school diploma to be able to take your exams. Any educational requirements are set by the company you are going to be working for, not any governmental agency.

There is however a mandatory background check. Both your financial affairs as well as any criminal history are looked at. So if you have felonies or a bankruptcy, these situations can prevent you from even being allowed to take your securities exams.

You must also be sponsored by a registered broker-dealer. You can not just go out and get your own license. And if you change jobs, your license must be transferred over to your new broker-dealer as soon as you begin your new career.

If you don’t have any problems, then all you need to do is STUDY! The series 7 exam is not easy and is a six hour test. The series 63 exam is much easier compared to the 7.

Taking the Series 7 and Series 63 Exams

All exams are administered by FINRA and must be taken at one of their testing facilities. This includes testing in the USA or abroad. And yes, there are testing centers for those of you living abroad.

According to FINRA…

“The exam consists of 250 scored questions and an additional 10 unscored pretest questions. Candidates are given six hours to complete the exam and it is conducted in two three-hour sessions with 130 questions per session. The passing score is 72 percent.“

Here’s a free PDF download with some great information about the exam and what you’ll need to know in order to pass it. It was created by FINRA and looks up to date. So check it out.

The cost to take the exam is $305.00 and is usually paid for by your sponsor. But make sure so you don’t see a surprise debit in your paycheck.

Once you do pass your exams, you’ll be allowed to sell a number of securities as well as other investments. Here’s a quick list to give you an idea of what passing the series 7 exam allows you to do…

  • corporate stocks and bonds
  • rights
  • warrants
  • real estate investment trusts (REITs)
  • collateralized mortgage obligations (CMOs)
  • municipal securities
  • options-equity, index, and foreign currency
  • investment company products/variable contracts
  • direct participation programs
  • exchange traded funds (ETFs)

Taking the Series 7 Exam

When you go to take the exam, FINRA suggests that you arrive 30 minutes prior to taking the test.

You will also need to have and do the following:

Provide one valid, government-issued identification with a signature and picture, such as an unexpired driver’s license, passport or military ID

Provide an image and/or biometric capture, such as a photograph, or palm print.

Sign the center’s sign-in log

Agree to abide by the FINRA Exam Center Rules of Conduct and the Testing Center Security Guidelines. If you refuse to abide by the exam center’s security guidelines and/or protocol, you will not be allowed to enter the center and a late fee will be charged to your firm or you will lose the paid exam fee.

Any violation of the rules will subject you to possible disciplinary action, including forfeiture of your test results.

You also can’t bring anything with you into the testing area. NOTHING! That means no notes, pencils or phones. You will be provided however with a calculator, small whiteboard and a marker if you need to write anything down.

Everything is computerized, so all you’ll be doing is clicking your mouse. Anything more will be provided to you by the testing center. Of course you’ll need to return everything given to you by the center after you’re finished.

Test Preparation

I was really lucky and the firm I worked for took the exams pretty seriously. I was sent to a preparation course by Kaplan while I was still a full time stockbroker trainee that lasted two weeks and was three hours each night Monday to Friday.

And I was also given a week off of work the week before the test to do nothing but study. Which I really did surprisingly.

Yes, it helped a lot! And I was grateful. I ended up passing the test with a 94. But you only need a 72.

The preparation center also gave me some great study materials as well. So on the weekends I studied on my own time.

The pass rate for the Series 7 exam is approximately 65%. In other words, 1 out of every 3 people that take the exam will not pass. So take the exam seriously, it’s your ticket to a very rewarding career as a stockbroker.

The Series 63 Exam

The Series 63 exam — the Uniform Securities State Law Examination — is a North American Securities Administrators Association (NASAA) exam administered by FINRA.

The current cost to take the Series 63 exam is $115. After you pay for the exam, you must take it within 120 days or you lose your money and must pay and register again.

The Series 63 is a much easier exam than the 7. In total there are only 65 questions, which 5 aren’t even graded. They’re experimental questions that the test administrator are thinking of using for later exams.

And don’t worry if you do fail your first time, many do as you can see on the chart below. The only catch is you must wait 30 days to take the test again.

series 63 pass rate

You’ll have a total of 75 minutes to complete the exam. And to pass, you’ll need to answer 43 of the questions out of the 60.

The sole purpose of this test is to test your knowledge of state regulations and laws. So for this test, there will be different questions depending on which state you want to be registered to be a securities broker.

The NASAA has a free study guide that’s not too bad and will definitely help you prepare if you’re not going to use any other test preparation materials.

You can get a free series 7 study guide for free here.

Like I said, the 63 is much easier. And if you passed the 7 you shouldn’t have any worries. But do study. It’s not as easy as it looks. And yes, I do suggest either getting some exam preparation materials and doing some self studying, or going to a live course like I did. In the end either can save you a lot of time and money.

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