Licenses and Training in Sales & Trading

by Vault Careers | March 10, 2009

Before you can even talk to a customer or trade a single share of stock, you need to pass the NASD Series 7 and 63 examinations. The Series 7 is the general securities license that every aspiring Wall Streeter needs to have before getting started. It is not an easy exam, so don't blow it off. Failing is embarrassing and a solid study schedule will ensure that you're spared the scorn of your entering class, and more importantly, the disapproval of your potential hiring department.

The Series 63 exam, by comparison is a lot easier. It's basically the exam that every registered representative needs to pass in order to sell securities in other states. Typically, people refer to passing the Series 63 as being "Blue Skied." This means that you can sell securities in any state under the big blue sky.

Recently, the NASDAQ changed its regulations to require that professionals who work on its exchange take the Series 55 exam. This was a result of the $1 billion odd-eighths settlement case in the mid-1990s. It's really a sort of continuing education requirement to make sure the NASDAQ professionals know their execution responsibilities under a constantly changing technology platform. It also tests ethics and professional conduct.

Because you're basically a cost center for your firm until you pass this exam, everything you do for the first few months in an analyst/associate training program is geared towards passing this exam. You will typically come to work, sit in a big classroom with other members of your class and have people talk to you about accounting and bond math. There may even be exams. In between these classroom sessions, you can expect to hear presentations from just about every single major sales and trading department at the firm. This is probably the only time you'll ever get to have such a broad exposure to so many different departments and managing directors, so if you don't pay attention for the bond math or accounting, at least take note of the names of the MDs, VPs and associates who are making the presentations. If you were hired into a generalist pool, the same hustle that got you in the door is going to be absolutely essential for you to get placed in the department that you desire.

Once you've gone through the departmental presentations and the basic bond math and accounting boot camp, you can expect to be placed in a Series 7 training session. The best way to think of this is to think back on your experience taking the Kaplan or Princeton Review classes for the SAT/GMAT. These classes are taught by Series 7 ringers, and they tend to spend a proportional part of their time covering proportionately important parts of the examination. Some of the material on the exam you can actually reason through without memorizing information (e.g., option payoff diagrams), but unfortunately most of it is very fact- and regulation-oriented. Knowing the implications of the Securities Act of 1933 and the Securities Exchange Act of 1934 are more important for the Series 7 than figuring payoff diagrams for various options strategies. And unfortunately, it's not enough just to know that the 1933 Exchange Act deals with offering reporting requirements whereas the 1934 Securities Exchange Act addresses the continuous reporting requirements of corporate issuers. You need to know the differences between Rule 503 and Rule 504 small offering exemptions. You need to know what Regulation A and Regulation D are, and so on, and so on. In short, pay attention in this class and do the assigned readings before your exam.

The Series 7 is a very long exam. It consists of 250 questions and you need to get 70 percent of the questions correct. While it may be your goal is to learn everything inside out to become a knowledgeable securities industry professionally there is no difference between getting a 99 percent and getting a 71 percent on the exam. There is no ranking of analysts/associates based on high grade achievements on an industry exam. After having attended the classes and reviewed the material, it's important to go through the practice exams. The priorities of the NASD are constantly changing, so if you're 24 hours before the exam and have a limited amount of time to study, start with the most current exams, and work backwards if you have time.

The exam is a computer-based exam and is administered by Sylvan Learning Centers, the same friendly folks that you've seen at your other licensing/scholastic standardized tests.

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