Reviewed by Tamir Rubin, Head of Product at iPREP • Updated January 2026
FINRA Series 7 Sample Question
A registered representative is reviewing the annual report of Horizon Technologies, a publicly traded company. The income statement shows net income of $25 million, and the balance sheet shows total assets of $200 million and total liabilities of $150 million. In the footnotes, the company discloses a pending lawsuit that could result in a $40 million payout.
Which of the following is the most accurate statement regarding the company’s financial condition?
- The lawsuit disclosure can be ignored because only items recorded on the balance sheet affect shareholders’ equity.
- The footnote disclosure indicates a potentially material risk that should be considered when evaluating the company’s financial condition and shareholders’ equity.
- The lawsuit must already be included in liabilities; otherwise, the financial statements are automatically incorrect.
- Earnings per share must be reduced immediately by $40 million because the lawsuit is disclosed.
Multiple-Choice Questions
Assesses: knowledge
- Four options; select one best
- Apply rules to customer scenarios
- Evaluate suitability, risks, and disclosures
- Compute yields, margins, and option outcomes
Test Duration
Total time: 3 hours 45 min • 130 total items (5 unscored)
You have 3 hours 45 minutes to complete all items. Plan steady pacing, flag time-consuming items, and return later. Avg pace: ~105 seconds per question.
Test Breakdown & Sample Questions
The FINRA Series 7 exam uses multiple-choice questions with four answer choices. The current exam delivers 130 total questions (125 scored + 5 unscored). The major job functions below reflect the current outline weights.
Function 1 (7% — about 9 scored questions)
- 1.1 Contacting current and potential customers; developing promotional and advertising materials and seeking appropriate approvals to distribute marketing materials
- 1.2 Describing investment products and services to current and potential customers
Function 2 (9% — about 11 scored questions)
- 2.1 Informing customers of the types of accounts and providing disclosures regarding various account types and restrictions
- 2.2 Obtaining and updating customer information and documentation, including required legal documents
- 2.3 Making reasonable efforts to obtain customer investment profile information
- 2.4 Obtaining supervisory approvals required to open accounts
Function 3 (73% — about 91 scored questions)
- 3.1 Providing customers with information about investment strategies, risks, and rewards, and communicating relevant market, investment, and research data to customers
- 3.2 Reviewing and analyzing customers’ investment profiles and product options to determine that investment recommendations meet applicable standards
- 3.3 Providing required disclosures regarding investment products and their characteristics, risks, services and expenses
- 3.4 Communicating with customers about account information, processing requests, and retaining documentation
Function 4 (11% — about 14 scored questions)
- 4.1 Providing current quotes
- 4.2 Processing and confirming customers’ transactions under regulatory requirements and informing customers of delivery obligations and settlement procedures
- 4.3 Informing the appropriate supervisor and assisting in the resolution of discrepancies, disputes, errors, and complaints
- 4.4 Addressing margin issues
Function 3 is the largest portion of the exam, so it should be a major focus in your study plan. Still, you should prepare across all four functions, because questions are distributed across the full outline and the exam requires a broad baseline of knowledge.
The exam blueprint is task-based. Each function is broken into tasks (Function 1 has two tasks; Functions 2–4 each have four tasks). Your practice should reflect that structure by drilling questions that map to each task area and then mixing them to simulate the real exam experience.
Did you know?
The Series 7 exam delivers 130 total multiple-choice questions, each with four answer choices. Of these, 125 questions are scored and 5 are unscored (pretest). Unscored questions do not count toward your grade and are mixed in randomly, so you won’t know which questions are unscored while you test.
FINRA Series 7 Preparation Strategies
A strong Series 7 plan is built on consistency: learn the outline, practice often, and tighten up weak areas.
Build a realistic study plan
Set a weekly schedule and organize your time by the exam’s major job functions. Prioritize the largest function, but don’t ignore smaller ones.
Focus on concepts, not memorization
Aim to understand why a rule or recommendation applies. Use memory aids only after you understand the idea.
Practice with purpose
Do regular mixed practice sets. Review every missed question, identify the reason you missed it, and track repeat weaknesses.
Review smart as test day approaches
Revisit your error log and condense key points into quick notes/flashcards for fast repetition and recall.
Simulate real testing
Take timed practice exams to build pacing and endurance, and refine your approach for managing time and flagged questions.
Use multiple resources (but keep them aligned)
Choose one primary course/book and supplement with practice questions. Add a study partner or tutor only if you’re stuck on repeat topics.
Test Features
What the Series 7 qualifies you for
The Series 7 is a core qualification exam for general securities representatives. It’s commonly required for roles that involve discussing, recommending, and transacting a broad mix of securities products with customers (as permitted by your firm and applicable registrations).
Attempts and retake rules
If you don’t pass, you can retake the exam, but FINRA applies waiting periods:
- After each of the first three failed attempts: 30 days before you can retest
- After the third failed attempt (and subsequent failures): 180 days before you can retest
Sponsorship requirement
To take the Series 7, you must be sponsored by a FINRA member firm (typically your employer). The SIE can be taken without sponsorship, which lets candidates start earlier.
Content outline alignment
FINRA updates the Series 7 outline periodically. Use prep materials that match the current Series 7 content outline, including the current weights by job function.
Technical Facts
FINRA Series 7 fast facts
- Total questions delivered: 130 (125 scored + 5 unscored/pretest)
- Multiple-choice: 4 answer choices
- Passing score: 72%
- Sponsorship required: Yes (FINRA member firm)
- U.S. citizenship required: No
Eligibility (at a glance)
- Firm sponsorship is required to register for Series 7
- SIE must be passed before or with Series 7
- Registration includes required forms/disclosures (and fingerprinting as applicable)
Maintaining registration
Once registered, you’ll complete periodic Regulatory Element training and your firm’s annual Firm Element training.
FINRA Series 7 Exam Tips
Before you start
- Bring required ID and arrive early.
- Take a minute to settle in and plan your pace.
While answering questions
- Read the full question first (then read it again if it’s long).
- Focus on the task: best next step, most likely outcome, calculation, or exception.
- Circle keywords mentally: most, least, except, not, primary.
When you’re unsure
- Eliminate clearly wrong choices first.
- If two choices look close, go back to what the question is truly asking.
- Don’t change an answer unless you spot a definite error.
Time and stamina
- Keep moving—don’t let one question burn your clock.
- Use scratch paper for quick math and to track your logic.
- Answer every question (no penalty for guessing).
- Reset after tough items and stay positive.
Results Scale and Interpretations
What “passing” means
- Passing: 72 or higher
- Not passing: below 72
What your score report tells you
Your result is reported as pass/fail, and your score report may also include performance feedback by content area to help you focus your next round of study (especially if you don’t pass).
Why the score isn’t always “percent correct”
FINRA uses a scaled scoring process (often called equating) to help keep results consistent across different versions of the exam. Because of this, your reported score may not match a simple calculation of the percentage of questions you answered correctly.
FAQs
The Series 7 (General Securities Representative Exam) is a FINRA qualification exam that measures whether a candidate has the knowledge required for an entry-level general securities representative role.
To take the Series 7, you must be sponsored by a FINRA member firm (typically your employer) and complete the required registration process. You must also pass the Securities Industry Essentials (SIE) exam before or in conjunction with the Series 7.
The exam is organized around major job functions and tasks, covering customer interactions, account opening and maintenance, product knowledge and suitability considerations, trade processing, and related regulatory responsibilities.
The exam delivers 130 multiple-choice questions (four answer choices each): 125 scored plus 5 unscored (pretest). Testing time is 3 hours and 45 minutes.
The passing score is 72.
You can retake the exam, but waiting periods apply:
– After each of the first three failed attempts: 30 days
– After the third failed attempt (and subsequent failures): 180 days
Your Series 7 registration remains active while you are properly registered through a sponsoring firm and meet ongoing requirements. If you leave a firm and are not registered for an extended period, your registration may lapse and requalification rules may apply.
Yes. Common resources include a primary course or textbook, targeted drills by topic, and full-length practice exams. The most important factor is that your materials align with the current content outline.
Passing the Series 7 supports many customer-facing roles at broker-dealers, such as registered representative and related sales/trading-support positions, depending on your firm and role.
Often, yes. Many roles also require a state “blue sky” exam such as Series 63, 65, or 66 (depending on your job function and state). Some positions may require additional principal or product-specific qualifications for supervision or specialized activities.
Administration
Test administrator
FINRA administers the Series 7 exam. Exams are scheduled and delivered through Prometric.
Scheduling window
After your exam enrollment is approved, you’ll receive a 120-day window to schedule and take the exam.
Reschedule/cancel policy
To avoid fees, reschedule or cancel at least 10 business days before your appointment. Changes within 10 business days may result in a fee.
Test format
Computer-delivered, multiple-choice.
Test-day materials and rules
Personal reference materials aren’t permitted in the testing room. Test-center rules are strictly enforced, and misconduct can result in score cancellation and additional consequences.
Cost
Exam fee: $395 (subject to change).
Retake policy
Retakes are allowed, but waiting periods apply after a failed attempt:
- 30 days after each of the first three failed attempts
- 180 days after the third failed attempt (and subsequent failures) within a two-year period
Test Provider
FINRA (the Financial Industry Regulatory Authority) is the self-regulatory organization responsible for developing and administering the Series 7 (General Securities Representative) exam. As part of its role overseeing broker-dealers and their registered personnel, FINRA maintains qualification standards and updates exam content to reflect current rules and industry practices.
Information Sources
Disclaimer –All iPREP tutoring resources and study guides are created independently for preparation purposes only. iPREP is not affiliated with, endorsed by, or sponsored by FINRA. FINRA and Series 7 (and any other referenced names, logos, or trademarks) are the property of their respective owners.
Free FINRA Series 7 Exam practice test: Get to know what the FINRA Series 7 Exam will be like by practicing with these sample questions:
Question 1 of 10
A registered representative is reviewing the annual report of Horizon Technologies, a publicly traded company. The income statement shows net income of $25 million, and the balance sheet shows total assets of $200 million and total liabilities of $150 million. In the footnotes, the company discloses a pending lawsuit that could result in a $40 million payout.
Which of the following is the most accurate statement regarding the company’s financial condition?
- The lawsuit disclosure can be ignored because only items recorded on the balance sheet affect shareholders’ equity.
- The footnote disclosure indicates a potentially material risk that should be considered when evaluating the company’s financial condition and shareholders’ equity.
- The lawsuit must already be included in liabilities; otherwise, the financial statements are automatically incorrect.
- Earnings per share must be reduced immediately by $40 million because the lawsuit is disclosed.
The correct answer is B.
Explanation (why B is correct): A pending lawsuit disclosed in the footnotes is a contingent liability. Even if it is not currently recorded as a liability, it can still be material and should be considered when evaluating financial condition and shareholders’ equity. Depending on the likelihood of loss and whether the amount can be reasonably estimated, the company may be required to accrue a liability; otherwise, it may be disclosed in the notes.
Why the other answers are wrong:
- A: Footnote disclosures can be material and are part of what investors must consider; they may signal obligations that could reduce equity.
- C: A disclosed contingency is not automatically recorded; recognition depends on established accounting criteria, so disclosure alone does not mean the balance sheet is “automatically incorrect.”
- D: EPS is not automatically reduced by a disclosed maximum exposure; the effect on earnings depends on whether a loss is recognized in the financial statements.
Question 2 of 10
An investor considering ABC Corp’s preferred stock asks her registered representative whether missed dividend payments would eventually be repaid before any dividends could be paid to common shareholders.
Which type of preferred stock offers this feature?
- Cumulative preferred
- Non-cumulative preferred
- Participating preferred
- Callable preferred
The correct answer is A.
Cumulative preferred stock requires that missed (or “arrears”) dividends be paid before common shareholders can receive dividends. Non-cumulative (B) permanently forfeits missed dividends. Participating (C) allows holders to share in additional dividends beyond the stated rate, but doesn’t guarantee repayment of missed ones. Callable (D) gives the issuer the right to redeem shares early, unrelated to dividend arrears.
QUESTION ANALYSIS:
- Topic Tested: Types of preferred stock — cumulative vs. other features
- Deception Strategy: Contextual misapplication (all are legitimate preferred types, but only one addresses the missed-dividend scenario)
- Distractor Analysis:
- B: Common misconception — students confuse cumulative with standard dividend rules.
- C: Attractive if students focus on “extra dividends” rather than arrears.
- D: Sounds protective but actually benefits the issuer, not investor.
- B: Common misconception — students confuse cumulative with standard dividend rules.
Question 3 of 10
A retail client, Mrs. Patel, asks her registered representative to evaluate the financial health of XYZ Corp before deciding whether to purchase its bonds. The RR notes that XYZ has a high level of current liabilities relative to current assets, but strong profitability margins. The RR must decide what to emphasize when discussing the company’s ability to meet near-term bond obligations.
Which financial ratio would provide the most relevant measure of XYZ’s short-term liquidity risk?
- Debt-to-equity ratio
- Current ratio
- Price-to-earnings (P/E) ratio
- Return on common equity
The correct answer is B.
The current ratio directly measures short-term liquidity by comparing current assets to current liabilities, showing whether a company can meet obligations coming due within one year. Debt-to-equity (A) is a leverage measure, not liquidity. P/E ratio (C) evaluates valuation relative to earnings, useful for stock investors but irrelevant to immediate bond safety. Return on equity (D) measures profitability and efficiency but does not reflect the firm’s ability to cover near-term obligations.
QUESTION ANALYSIS:
- Topic Tested: Financial statement analysis—tools for assessing liquidity and bond safety
- Deception Strategy: Contextual misapplication (several ratios are valid in other analyses but not for short-term bond risk)
- Distractor Analysis:
- A (Debt-to-equity): Plausible since leverage is relevant to bonds, but it measures long-term solvency, not immediate liquidity.
- C (P/E ratio): Attracts equity-focused candidates who confuse valuation metrics with credit analysis.
- D (Return on common equity): Plausible given profitability reference in the scenario, but profitability ≠ liquidity.
- A (Debt-to-equity): Plausible since leverage is relevant to bonds, but it measures long-term solvency, not immediate liquidity.
B (Current ratio): Correct—direct liquidity measure relevant to the scenario.
Question 4 of 10
Mr. Lopez, a conservative bond investor, is reviewing ABC Corporation’s balance sheet. He notices that ABC’s total debt has increased significantly, while shareholder equity has remained flat. He asks his registered representative whether this affects the safety of purchasing new ABC bonds.Which ratio best highlights the long-term financial risk of bankruptcy in this situation?
- Debt-to-equity ratio
- Current ratio
- Dividend payout ratio
- Inventory turnover ratio
The correct answer is A.
The debt-to-equity ratio measures financial leverage, showing how much the company relies on debt relative to shareholder equity. A high or rising ratio increases long-term bankruptcy risk, a key concern for bond investors. The current ratio (B) measures short-term liquidity, not long-term solvency. Dividend payout ratio (C) shows dividend sustainability, relevant to equity holders, not bond safety. Inventory turnover (D) measures efficiency, not default risk.
QUESTION ANALYSIS:
- Topic Tested: Risk of bankruptcy / leverage analysis
- Deception Strategy: Regulatory exception trap (several ratios are useful, but only one directly addresses the stated risk)
- Distractor Analysis:
- B: Common student mistake—confusing short-term liquidity with long-term solvency.
- C: Attractive if focused on dividends instead of debt risk.
- D: Efficiency ratio—irrelevant but plausible-sounding.
- B: Common student mistake—confusing short-term liquidity with long-term solvency.
Question 5 of 10
A client evaluating DEF Corporation’s stock asks whether the company is efficiently generating profits for shareholders relative to their equity investment. The registered representative explains that while earnings per share have grown modestly, the key measure of competitiveness against peer firms is shareholder return.
Which ratio should the representative use to answer the client’s question?
- Net profit margin
- Current yield
- Price-to-earnings (P/E) ratio
- Return on common equity
The correct answer is D.
Return on common equity (ROE) measures profitability relative to shareholders’ equity and is the primary metric for assessing how effectively a company uses shareholder investment to generate returns. Net profit margin (A) measures profitability relative to sales, not equity. Current yield (B) applies to bonds, not stock profitability. P/E ratio (C) reflects market valuation, not efficiency of equity use.
QUESTION ANALYSIS:
- Topic Tested: Profitability & competitiveness (ROE vs. other ratios)
- Deception Strategy: Contextual misapplication (several ratios are correct in different contexts but not for the client’s question)
- Distractor Analysis:
- A: Common mix-up between sales profitability and equity efficiency.
- B: Attracts test-takers who forget yield applies to bonds, not stock.
- C: P/E often mistakenly chosen since it’s widely used, but it’s a valuation metric, not profitability.
- A: Common mix-up between sales profitability and equity efficiency.
Question 6 of 10
Mr. Reynolds purchases a variable life insurance policy and is concerned about what happens if his separate account investments perform poorly. The registered representative explains that, regardless of investment performance, his beneficiaries are guaranteed a minimum payout if he dies.
Which feature of the contract ensures this protection?
- Living benefit rider
- Variable subaccount performance
- Minimum death benefit guarantee
- Adjustable premium feature
The correct answer is C.
Variable life insurance policies guarantee a minimum death benefit even if the separate account underperforms, making it an insurance product as well as an investment. Living benefit rider (A) applies to accessing funds while alive. Subaccount performance (B) drives investment value but doesn’t guarantee death protection. Adjustable premium feature (D) applies to flexible-premium contracts, not guaranteed death benefit.
QUESTION ANALYSIS:
- Topic Tested: Variable life insurance contract guarantees
- Deception Strategy: Assumption challenge (many assume poor investments eliminate guarantees, but insurance feature remains)
- Distractor Analysis:
- A: Plausible if confusing living vs. death benefits.
- B: Common error — focusing on investments rather than insurance guarantees.
- D: Attractive for students familiar with flexible-premium contracts, but not relevant here.
- A: Plausible if confusing living vs. death benefits.
Question 7 of 10
Which of the following best describes corporate commercial paper under FINRA rules?
- An unsecured short-term promissory note with a maximum maturity of 270 days, exempt from SEC registration
- A negotiable certificate of deposit issued by a broker-dealer, typically with maturities over one year
- A long-term corporate bond denominated in U.S. dollars but issued overseas
- A variable-rate preferred stock with dividends tied to money market benchmarks
The correct answer is A.
Corporate commercial paper is an unsecured, short-term debt instrument issued by corporations to meet immediate funding needs. By rule, maturities may not exceed 270 days and it is generally issued at a discount. Because it is under 270 days, it qualifies as an exempt security from SEC registration under the Securities Act of 1933. Brokered CDs (B) are bank-issued deposits, not corporate debt. Eurodollar bonds (C) are long-term dollar-denominated bonds issued abroad. Variable-rate preferreds (D) are equity instruments, not debt.
QUESTION ANALYSIS:
- Topic Tested: Debt securities — regulatory definition of commercial paper
- Testing Strategy: Definitional precision (exact characteristics and exemption rules)
- Distractor Analysis:
- B: Brokered CDs confuse candidates since both are money market instruments, but maturities differ.
- C: Eurodollar bonds are often mistaken as “short-term” since they’re foreign, but they’re long-term corporate bonds.
- D: Variable-rate preferreds are equities, not debt, a common confusion point.
- B: Brokered CDs confuse candidates since both are money market instruments, but maturities differ.
Question 8 of 10
ABC Corporation reports the following financial data for the year:
- Revenue: $6,000,000
- Cost of Goods Sold (COGS): $2,400,000
- Operating Expenses (excluding depreciation): $1,200,000
- Depreciation: $400,000
- Interest Expense: $300,000
- Taxes: $500,000
What is ABC’s Earnings Before Interest and Taxes (EBIT)?
- $1,700,000
- $2,400,000
- $2,000,000
- $1,300,000
The correct answer is C: $2,000,000
Step 1: Revenue – COGS = Gross Profit = $6,000,000 – $2,400,000 = $3,600,000.
Step 2: Subtract operating expenses (excluding depreciation): $3,600,000 – $1,200,000 = $2,400,000.
Step 3: Subtract depreciation: $2,400,000 – $400,000 = $2,000,000.
Therefore, EBIT = $2,000,000.
- Option A ($1,700,000) reflects EBT (subtracting interest too early).
- Option B ($2,400,000) reflects EBITDA (failure to subtract depreciation).
- Option D ($1,300,000) reflects Net Profit after subtracting both interest and taxes.
QUESTION ANALYSIS:
- Topic Tested: Income statement calculations — distinguishing EBIT from EBITDA, EBT, and Net Profit
- Mathematical Strategy: Formula differentiation (similar metrics with subtle differences)
- Distractor Analysis:
- A: Prematurely subtracting interest = EBT.
- B: Common error = confusing EBIT with EBITDA (ignoring depreciation).
- D: Subtracting both interest and taxes = Net Profit.
- A: Prematurely subtracting interest = EBT.
Question 9 of 10
Under SEC Rule 3a51-1, which of the following securities is considered a penny stock?
- An exchange-listed security trading at $2.50 per share with an average daily market cap exceeding $200 million
- A stock listed on the NYSE trading at $4.50 per share
- A Nasdaq-listed stock trading at $3.00 per share
- An equity security trading at $4.50 per share in the over-the-counter market that is not listed on a national exchange
The correct answer is D.
A penny stock is defined under SEC Rule 3a51-1 as an equity security not listed on a national exchange that trades below $5.00 per share and does not meet certain financial or market cap thresholds. Option A is excluded because large-cap exchange-listed securities are not classified as penny stocks even when trading below $5. Options B and C are excluded because NYSE- and Nasdaq-listed securities are specifically exempt, regardless of price.
QUESTION ANALYSIS:
- Topic Tested: SEC Rule 3a51-1 — definition of penny stock
- Testing Strategy: Definitional precision (exact criteria of what qualifies as a penny stock)
- Distractor Analysis:
- A: Market cap and exchange listing exempt this from penny stock status despite low share price.
- B: Misconception that low price alone defines penny stock (exchange-listed securities are exempt).
- C: Similar trap—Nasdaq-listed securities are not penny stocks even if under $5.
- A: Market cap and exchange listing exempt this from penny stock status despite low share price.
Question 10 of 10
All of the following are true regarding customer trade confirmations and account statements EXCEPT:
- A trade confirmation must include key transaction details such as the security description, quantity (or par value), and the price.
- A trade confirmation must be provided to the customer at or before completion of the transaction.
- Account statements must be sent at least quarterly, and monthly if the account has activity.
- A firm may send duplicate trade confirmations to a third party based on the customer’s verbal permission (no written authorization needed).
The correct answer is D.
Explanation (why D is correct):
Sending duplicate confirmations to a third party generally requires the customer’s written authorization/instructions. Verbal permission alone is not sufficient for routinely providing confirmations to a third party.
Why the other answers are wrong:
- A: Confirmations include core trade details (security, quantity/par value, and price) among other required disclosures.
- B: Confirmations must be provided at or before completion of the transaction.
- C: Firms must provide account statements at least quarterly, and monthly when there is activity.