Agenda

About the Series 7 Rep Level Exam

The Series 7 Rep Level exam is broken down into four parts (by job function). These topics include:

• Seeks Business for the Broker-Dealer from Customers and Potential Customers
• Opens Accounts After Obtaining and Evaluating Customers’ Financial Profile and Investment Objectives
• Provides Customers with Information About Investments, Makes Suitable Recommendations, Transfers Assets and Maintains Appropriate Records
• Obtains and Verifies Customers’ Purchase and Sales Instructions; Processes, Completes and Confirms Transactions

What’s Covered By This Course

Seeks Business for the Broker-Dealer from Customers and Potential Customers

• Standards and required approvals of public communications
• Types of communications (e.g., retail, institutional, correspondence)
• Seminars, lectures and other group forum requirements
• Product specific advertisements and disclosures
• Process of bringing new issues to market (e.g., due diligence, registration statement, preliminary prospectus, final prospectus, underwriting agreement, selling group agreement, blue-sky laws and procedures)
• Regulatory requirements for initial public offerings (IPOs) (e.g., restrictions on prospecting or soliciting, allowable communications with the public)
• Primary financing for municipal securities (e.g., competitive sale, negotiated sale, private offering, advance refunding)
• Syndicate formation and operational procedures (e.g., purpose of syndicate bid, roles and responsibilities of underwriters, selling group concession and reallowance)
• Pricing practices and components of underwriters’ spread and determination of underwriters’ compensation and selling practices
• Prospectus requirements (e.g., timeliness of information, preliminary prospectus (red herring), final prospectus)
• Information required in a registration statement and offering material on new issue (e.g., in pre-filing period, in cooling-off period, in post-registration period)
• Official statements, preliminary official statements, notice of sale for municipal securities
• Qualified institutional buyer (QIB) and accredited investor
• Qualification requirements for Regulation A offerings (e.g., filing of abbreviated registration statement and offering circular
• Regulation D offerings (e.g., exemption from SEC registration, access to capital markets, accredited investors)
• Securities and transactions exempted from registration, including Section 3(a)(11) of the Securities Act of 1933 and Rule 147 thereunder (i.e., intrastate offering)
• Regulatory requirements for private placements or resales
• Nonregistered foreign securities sold to institutions qualified in the U.S.
• Foreign securities prohibited from being sold to U.S. investors

Opens Accounts After Obtaining and Evaluating Customers’ Financial Profile and Investment Objectives

• Types of accounts (e.g., prime brokerage, advisory or fee-based)
• Account registration types (e.g., tenants in common (TIC), community property, sole proprietorship, partnership, unincorporated associations)
• Requirements for opening customer accounts
• Retirement plans and other tax advantaged accounts
• Wealth events (e.g., inheritance)
• Account registration changes and internal transfers
• Customer screening (e.g., customer identification program (CIP), know your customer (KYC), domestic or foreign residency and/or citizenship, corporate insiders, employees of broker-dealers or self-regulatory organizations (SROs))
• Information security and privacy regulations (e.g., initial privacy disclosures to customers, opt-out notices, disclosure limitations, exceptions)
• Essential facts regarding customers and customer relationships
• Financial factors relevant to assessing a customer's investment profile
• Investment objectives (e.g., preservation of capital, income, growth, speculation)
• Reasonable-basis suitability, customer-specific suitability and quantitative suitability
• Investment strategies and recommendations to hold
• Verification of investor accreditation and sophistication
• Required review, approvals and documentation for account opening and maintenance
• Physical receipt, delivery and safeguarding of cash or cash equivalents, checks and securities
• Circumstances for refusing or restricting activity in an account or closing accounts

Provides Customers with Information About Investments, Makes Suitable Recommendations, Transfers Assets and Maintains Appropriate Records

• Customer-specific factors that generally affect the section of products (i.e., customer's investment profile, including the customer's risk tolerance, investment time horizon and investment objectives, liquidity needs)
• Portfolio of account analysis and its application to product selection (e.g., diversification, concentration, volatility, potential tax ramifications)
• Portfolio theory (e.g., alpha and beta considerations, Capital Asset Pricing Model (CAPM))
• Delivery of annual reports and notices of corporate actions (e.g., dividends, splits, odd lot tenders)
• Fundamental analysis of financial statements and types of financial statements included in an annual report, importance of footnotes, material risk disclosures and key terms (e.g., assets, liabilities, capital, cash flow, income, earnings per share (EPS), book value, shareholders' equity, depreciation, depletion, goodwill)
• Balance sheet and methods of inventory valuation: last-in, first out (LIFO), first-in, first-out (FIFO) and methods of depreciation
• Income statement and calculations derived from an income statement: earnings before interest and taxes (EBIT); earnings before taxes (EBT); net profit; and earnings before interests, taxes, depreciation and amortization (EBITDA)
• Principal tools to measure financial health
• Types of stock
• Characteristics of common stock
• Characteristics of preferred stock
• Rights and warrants: origination, exercise terms, relationship of subscription price to market price of underlying stock, anti-dilution agreement
• Electronic exchanges or auction markets (e.g., electronic communications networks (ECNs), over-the-counter (OTC), dark pools of liquidity)
• Types of characteristics of non-U.S. market securities (e.g., American Depositary Receipts (ADR's), corporate equity)
• Tax treatment of equity securities transactions
• Investment companies, exchange-traded funds (ETFs), unit investment trusts (UITs)
• Variable life insurance/annuity contracts
• Real estate investment trusts (REITs)
• Direct participation programs (DPPs)
• Listed options and their characteristics
• Basic strategies
• Advanced strategies
• Profit and loss calculations, break-even points, economics of positions
• Tax treatment of option transactions
• Types of debt securities and money market instruments
• Characteristics: structure, risks and rewards, call provisions
• Structured products
• Types and characteristics of non-U.S. market securities
• Types of yields
• Bond ratings
• Tax implications of taxable debt securities, including original issue discount (OID) rules, interest, principal, premiums, discounts, and capital gain and losses
• Types of corporate bonds
• Convertible bond: general characteristics
• General characteristics of municipal fund securities, methods of quotation, interest rate, payment periods, denominations, diversity of maturities and legal opinion
• Analysis and diversification of municipal investments: geographical, type and rating
• Analysis of general obligations (GO) bonds, including: characteristics of the issuer, nature of the issuer's debt, factors affecting the issuer's ability to pay, municipal debt ratios
• Analysis of revenue bonds, including feasibility studies, sources of revenue, security (protective covenants of bond indenture), financial reports and outside audits, restrictions on the issuance of additional bonds, flow of funds, earnings coverage, sources of credit information, rating services, credit enhancements
• Purpose of characteristics of specific types of municipal securities
• Factors affecting the marketability of municipal bonds: rating, maturity, call features, interest (coupon) rate, block size, liquidity (ability to sell the bond in the secondary market), dollar /yield price, issuer name (local or national reputation), credit enhancement, credit and liquidity support, denominations
• Pricing of municipal securities and other mathematical calculations: dollar price, accrued interest (regular coupon, odd first coupon), computations of accrued interest (30/360), amortization of premium, accretion of discount, relationship of bond prices to changes in maturity, coupon, various yield calculations (taxable equivalent yield, net yield after capital gains tax, current yield, YTC on premium bonds) value of basis point in default
• Tax treatment of municipal securities: securities bought at a discount or premium in the secondary market, OID, federal income tax status, state and local tax status, computation of taxable equivalent yield, accrued interest, AMT, bonds, taxable bonds, band qualified bonds
• Structure of hedge funds and fund of funds
• Characteristics of hedge funds
• Tax treatment of distributions
• Collateralized mortgage obligations (CMOs)
• Collateralized debt obligations (CDOs)
• Characteristics of asset-backed securities
• Treasury bills, notes bonds
• Treasury receipts (Separate Trading of Registered Interest and Principal Securities (STRIPS)/zero coupon)
• Treasury Inflation Protected Securities (TIPS)
• Characteristics of U.S. Treasury Securities
• Government National Mortgage Association (GNMA)
• Federal National Home Loan Mortgage Association (FNMA)
• Federal Home Loan Mortgage Association (SLMA)
• Characteristics: types, maturities, denominations, primary dealers, distribution, issue form, quotations, pass-through, calculating a spread, pricing, payment of interest and principal
• Required disclosures on specific transactions
• Types of investment risks
• Types of investment returns
• Costs and fees associated with investments
• Tax considerations
• Market analysis considerations
• Market analysis considerations for municipal securities, including Bond Buyer indexes
• Technical analysis of basic chart patterns and key terms (e.g., trend lines, saucer/inverted saucer, head-and-shoulders/inverted head-and-shoulders, breakouts, resistance/support levels, moving averages, consolidation, stabilization, overbought and oversold)
• Disclosure of material events affecting retail sales of municipal bonds
• Customer confirmations and statements, including: components, timing, mailings to third parties, and exceptions
• Account value, profits and losses, realized and unrealized
• Withdrawals and tenders
• Customer account records
• Transferring accounts between broker-dealers
• Books and records retention requirements
• Account closure procedures

Obtains and Verifies Customers’ Purchase and Sales Instructions; Processes, Completes and Confirms Transactions

• Orders, offerings, and transactions in customer accounts
• Trade execution activities
• Types of securities quotes
• Types of orders
• Short sale requirements and strategies
• Securities lending
• Best execution obligations
• Information required on order ticket
• Market making activities: role and functions of the designated market maker, listing requirements, limitations on trading during significant market declines, principal transactions, agency transactions, quotations
• Use of automated execution systems
• Regulatory reporting requirements
• Delivery requirements
• Good delivery
• Settlement of transactions
• Erroneous reports, errors, cancels and rebills
• Requirements for addressing customer complaints and consequences of improper handling of complaints
• Methods of formal resolution
• Form U4 reporting requirements
• Requirements and characteristics of margin accounts and required disclosures
• Product of strategy specific requirements
• Calculations in margin accounts
• Initial margin: long market value, short market value, debit balance, credit balance, initial Regulation T margin requirement on long or short positions, Regulation T requirement for established accounts, loan value, excess equity, buying power of deposited securities
• Maintenance: additional purchases, sales (short or long), cash withdrawals, stock withdrawals, simultaneous purchases and sales, restrictions, liquidation to meet a margin/maintenance call, deposit of cash or securities required to meet a margin or maintenance call
• Special memorandum account (SMA): balance, buying power, prohibited use of SMA, effect of excess equity, deposit of margin able securities, receipt of cash dividends and earned interest, liquidation of securities in the account, cash or securities withdrawals, new margin securities purchased or sold short
• Other margin accounts