Series 7 Exam Topics Breakdown: The Most Tested & Hardest Subjects in 2026

Series 7 Exam Topics Breakdown: Everything FINRA Tests in 2026

The Series 7 exam — officially the General Securities Representative Qualification Examination — is the license that allows you to sell virtually all types of securities products. With a 65-72% pass rate, it is one of the toughest FINRA exams in the industry.

The key to passing is knowing what the exam actually tests and where candidates fail. This guide gives you the exact percentage weights, a deep dive into every major topic, and a ranked list of the five hardest subjects so you can build a study plan that maximizes your score.

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2026 Series 7 Exam Format at a Glance

Before diving into topics, here is what the exam looks like on test day:

The 5 unscored questions are randomly mixed in and look exactly like real questions. You cannot tell them apart, so treat every question as if it counts.

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The 4 Job Functions: Exact Percentage Weights

FINRA organizes the Series 7 around four "job functions" that describe what a General Securities Representative does day to day. Here are the exact 2026 weights:

The takeaway is unmistakable: Function 3 is the exam. Nearly three out of every four questions come from this single section. If you master Function 3, you are most of the way to passing. If you neglect it, no amount of preparation on the other functions can save you.

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Function 1: Seeks Business for the Broker-Dealer (7%)

This is the smallest section, but do not skip it — 9 free points matter when you need 90 to pass.

What FINRA tests:

• Rules for communications with the public (retail communications, correspondence, institutional)
• Advertising and sales literature compliance
• Cold calling rules and the Do Not Call Registry
• Referral and networking practices
• Social media and electronic communications rules
• FINRA Rule 2210 (Communications with the Public)

Study approach: This section is mostly rule-based memorization. Learn the three categories of communication, the approval requirements for each, and the filing requirements with FINRA. One focused study session of 3-4 hours is usually sufficient.

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Function 2: Opens Accounts After Obtaining and Evaluating Customer Financial Profile (9%)

This function covers the mechanics of account opening and understanding customer situations.

What FINRA tests:

• Account types: individual, joint (JTWROS, TIC), custodial (UGMA/UTMA), trust, corporate, partnership
• Required documentation and new account forms
• Customer Identification Program (CIP) requirements under the Patriot Act
• Suitability obligations at account opening (Reg BI — Regulation Best Interest)
• Powers of attorney and fiduciary accounts
• ERISA and retirement account rules (IRA, Roth IRA, 401k, 403b)
• Account transfers via ACATS

Study approach: Focus on the differences between account types and the specific documentation each one requires. Know the CIP rules cold. Understand UGMA vs. UTMA. About 10-12 study hours should cover this section well.

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Function 3: The 73% Section — Deep Dive

This is where the exam lives. Function 3 covers everything about making investment recommendations and managing customer portfolios. Here is how it breaks down by sub-topic:

Equity Securities

• Common stock vs. preferred stock (rights, risks, dividends)
• ADRs (American Depositary Receipts)
• Rights and warrants
• IPOs and the underwriting process (firm commitment, best efforts, all-or-none)
• Market structure: exchanges, OTC, ECNs
• Short selling mechanics and rules

Debt Securities

• Corporate bonds (secured, unsecured, convertible, callable)
• U.S. government securities (T-bills, T-notes, T-bonds, TIPS, STRIPS)
• Agency securities (GNMA, FNMA, FHLMC) — know the government guarantee distinctions
• Municipal bonds (general obligation vs. revenue) — heavily tested
• Money market instruments (commercial paper, BAs, repos)
• Bond pricing, yield calculations (current yield, YTM, YTC)
• Interest rate risk, credit risk, reinvestment risk, call risk

Options

• The four basic positions: long call, short call, long put, short put
• Intrinsic value and time value
• Options strategies: covered calls, protective puts, collars
• Spreads: bull call, bear put, bull put, bear call — debit vs. credit
• Straddles and combinations
• Hedging with options
• Index options and foreign currency options
• Max gain, max loss, and breakeven calculations for every strategy
• Options account requirements and approval levels

Packaged Products

• Mutual funds (open-end): NAV calculations, sales charges, breakpoints, rights of accumulation, LOI
• Closed-end funds vs. ETFs
• UITs (Unit Investment Trusts)
• Variable annuities and variable life insurance (separate account, general account, surrender charges)
• 529 plans and Coverdell ESAs

Direct Participation Programs (DPPs) and REITs

• Limited partnerships: general partner vs. limited partner roles
• Oil and gas programs, real estate programs, equipment leasing
• At-risk rules and tax implications
• REITs: equity, mortgage, hybrid — qualification requirements (75% rule, 90% distribution)
• Non-traded REITs risks

Suitability and Recommendations

• Regulation Best Interest (Reg BI) obligations
• Customer risk profiling: conservative, moderate, growth, aggressive, speculative
• Investment objectives: capital preservation, income, growth, speculation
• Life-stage investing: young professional, mid-career, pre-retiree, retiree
• Asset allocation and diversification principles
• Quantitative suitability (churning, excessive trading)

Tax Implications

• Capital gains: short-term vs. long-term
• Cost basis methods (FIFO, specific identification, average cost)
• Wash sale rule (30-day rule)
• Tax treatment of dividends (qualified vs. non-qualified)
• Municipal bond tax exemptions (federal, state, AMT)
• Tax-advantaged accounts: IRA contributions, distributions, required minimum distributions (RMDs)
• 1035 exchanges for annuities and life insurance

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Function 4: Obtains and Verifies Customer Purchase and Sales Instructions (11%)

This section covers what happens after a recommendation is made — the trade execution and settlement process.

What FINRA tests:

• Order types: market, limit, stop, stop-limit, GTC, day
• Trade execution and confirmation requirements
• Settlement dates: T+1 for most securities, T+0 for government securities
• Delivery requirements (good delivery, DK — don't know)
• Regulation SHO (short selling rules, locate requirements)
• Books and records requirements
• Customer complaints and dispute resolution
• Death of a customer — account handling procedures

Study approach: Know the order types inside and out — the exam loves scenario questions where you must determine which order type is appropriate. Learn settlement cycles and good delivery rules. About 12-15 study hours is appropriate given the 11% weight.

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The 5 Hardest Series 7 Topics: Ranked

These are the topics that cause the most failures, based on FINRA score reports and industry data. If you can conquer these five areas, you dramatically increase your odds of passing.

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#1 — Options (Spreads, Straddles, and Hedging)

Why it is the most failed topic: Options questions require you to combine conceptual understanding with fast calculations under time pressure. A single spread question may require you to identify the strategy, determine if it is bullish or bearish, calculate max gain, max loss, and breakeven — all in under two minutes.

What the exam tests:

• Identifying strategy type from a position description
• Calculating max gain, max loss, and breakeven for all basic and combination strategies
• Determining whether a strategy is bullish, bearish, or neutral
• Hedging equity positions with puts and calls
• Index options settlement (cash settlement, European-style exercise)

Common traps:

• Confusing debit spreads with credit spreads
• Forgetting that short options have opposite max gain/loss profiles
• Mixing up the breakeven formulas for spreads vs. straddles
• Not recognizing a "married put" is the same as a "protective put"
• Mishandling questions where premiums change between opening and closing

Study approach:

1. Master the four basic positions first — do not move on until you can instantly state max gain, max loss, and breakeven for each
2. Learn the T-chart method for spreads (explained below)
3. Practice 200+ options-only questions
4. Use our AI tutor to walk through any strategy you miss — it will draw out the payoff logic step by step
5. Take a dedicated options practice exam and target 80%+ before moving on

The T-Chart Method for Options Spreads

The T-chart is the single most useful mechanical technique for solving options spread questions on the Series 7. Here is how it works:

Step 1: Draw a T. Label the left side "Money Out" (debits) and the right side "Money In" (credits).

Step 2: Place each premium on the correct side. Buying = Money Out. Selling = Money In.

Step 3: Determine net debit or net credit by subtracting the smaller side from the larger.

Step 4: Apply the rules: Max loss for a debit spread = net debit. Max gain for a debit spread = spread width minus net debit. (Reverse for credit spreads.)

Worked Example: Bull Call Spread

An investor buys 1 XYZ Jan 50 call at $5 and sells 1 XYZ Jan 60 call at $2. What is the max gain, max loss, and breakeven?

• Net debit = $5 - $2 = $3 (× 100 shares = $300)
• Spread width = $60 - $50 = $10
• Max loss = Net debit = $3 per share ($300 total)
• Max gain = Spread width − Net debit = $10 − $3 = $7 per share ($700 total)
• Breakeven = Lower strike + Net debit = $50 + $3 = $53

This is a bullish, debit spread — the investor profits when XYZ rises above the breakeven of $53, with limited risk ($300) and limited reward ($700).

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#2 — Municipal Securities

Why it is so difficult: Municipal securities have their own ecosystem of rules, tax treatments, and issuance procedures that differ significantly from corporate and government bonds. Candidates who treat munis as "just another bond type" consistently underperform.

What the exam tests:

• General Obligation (GO) bonds: backed by taxing power (ad valorem taxes), voter approval required
• Revenue bonds: backed by specific project revenue (tolls, fees), feasibility study, flow of funds (net revenue pledge vs. gross revenue pledge)
• The legal opinion and the role of bond counsel
• Official statement vs. prospectus
• Tax-equivalent yield calculation: Tax-Exempt Yield ÷ (1 − Tax Bracket)
• De minimis tax rule for municipal bonds bought at a market discount
• Alternative Minimum Tax (AMT) — private activity bonds
• MSRB rules and the role of the MSRB vs. FINRA

Common traps:

• Confusing GO bond approval requirements with revenue bond requirements
• Forgetting that not all municipal bonds are tax-exempt (taxable munis exist)
• Misapplying the tax-equivalent yield formula (dividing in the wrong direction)
• Not knowing when AMT applies to muni interest
• Confusing the official statement with corporate prospectus requirements

Study approach:

1. Create a comparison chart: GO bonds vs. Revenue bonds across 10+ characteristics
2. Memorize the tax-equivalent yield formula and practice 20+ calculations
3. Learn the flow of funds for revenue bonds (gross pledge vs. net pledge)
4. Study MSRB rules as a separate mini-topic (2-3 hours)
5. Focus on the legal opinion — what it covers, what it does not cover

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#3 — Margin Accounts

Why it is so difficult: Margin calculations are multi-step math problems. A single question may require you to calculate the long market value, debit balance, equity, Reg T requirement, and SMA — and then determine what action is needed.

What the exam tests:

• Reg T initial margin requirement (50% for long purchases)
• Maintenance margin: 25% for long positions, 30% for short positions (FINRA minimums, but firms can set higher)
• SMA (Special Memorandum Account) — what creates SMA, what reduces SMA
• Margin calls: initial margin call vs. maintenance margin call
• Restricted accounts: what you can and cannot do
• Short margin account calculations (credit balance, short market value, equity)
• Combined margin accounts

Common traps:

• Confusing Reg T (initial) with maintenance margin
• Forgetting that SMA does not disappear when the market value drops (SMA is a "line of credit")
• Incorrectly calculating equity in a short margin account (Credit Balance − Short Market Value)
• Not knowing the difference between a Fed call, a house call, and a maintenance call
• Applying the wrong maintenance percentage (25% long, 30% short — but firms can require more)

Study approach:

1. Build a margin calculation template and practice filling it in for 30+ scenarios
2. Separate long margin and short margin into two study sessions — do not mix them until you are comfortable with each
3. Create flashcards for SMA rules (what adds to SMA, what reduces SMA)
4. Practice maintenance margin call calculations — the exam loves "at what price does a margin call occur?" questions
5. Work through at least 50 margin-specific practice questions

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#4 — Suitability and Risk Profiling

Why it is so difficult: Unlike calculation-based questions, suitability questions require judgment. Two answer choices may both seem reasonable, and you must determine which is the most suitable recommendation for the specific customer profile given.

What the exam tests:

• Reg BI obligations: disclosure, care, conflict of interest, compliance
• Matching investment products to customer profiles (age, income, net worth, risk tolerance, time horizon, liquidity needs, tax status)
• Recognizing unsuitable recommendations (high-risk products for conservative investors, illiquid products for customers needing liquidity)
• Quantitative suitability — identifying churning and excessive trading
• Life-stage analysis scenarios

Common traps:

• Choosing an investment that matches the customer's stated objective but ignores their overall profile (e.g., a 70-year-old retiree who says they want growth — the exam expects you to prioritize capital preservation)
• Not recognizing that "moderate" risk tolerance does not mean 100% equities
• Ignoring tax status — recommending municipal bonds to someone in a low tax bracket
• Overlooking liquidity needs — recommending a DPP or non-traded REIT to someone who may need cash soon
• Confusing suitability with best interest (post-Reg BI, the standard is higher)

Study approach:

1. For every practice question, write out the full customer profile before looking at the answer choices
2. Rank the customer's priorities: safety, income, growth, liquidity, tax efficiency
3. Learn which products match which risk profile (a common exam table format)
4. Practice 100+ suitability scenario questions
5. When in doubt, choose the most conservative answer that still meets the customer's primary objective

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#5 — Tax Consequences of Investment Transactions

Why it is so difficult: Tax questions combine knowledge of IRS rules with investment mechanics. You need to know cost basis, holding periods, wash sales, and the specific tax treatment of different security types — and apply all of it under exam conditions.

What the exam tests:

• Short-term vs. long-term capital gains (holding period: more than 12 months = long-term)
• Cost basis calculations for stocks, bonds, mutual funds, and inherited securities (step-up basis)
• Wash sale rule: selling at a loss and buying substantially identical securities within 30 days before or after
• Tax treatment of bond premiums and discounts (amortization for premium bonds, accretion for OID bonds)
• Qualified dividends vs. ordinary dividends (tax rate differences)
• Municipal bond interest: federal tax-exempt, possible state tax-exempt, AMT implications
• 1035 exchanges for annuities and life insurance policies
• IRA and Roth IRA tax implications (deductibility, qualified distributions, early withdrawal penalties, RMDs)

Common traps:

• Forgetting the wash sale rule applies 30 days before AND 30 days after the sale
• Not adjusting cost basis after a wash sale (the disallowed loss is added to the new position's basis)
• Confusing accretion of OID bonds with amortization of premium bonds
• Treating all municipal bond interest as fully tax-free (private activity bonds may trigger AMT)
• Not knowing the step-up in basis rule for inherited securities vs. the carryover basis for gifted securities

Study approach:

1. Create a tax treatment cheat sheet organized by security type (stocks, bonds, munis, mutual funds, options)
2. Practice 10+ wash sale scenarios — these are exam favorites
3. Learn the cost basis adjustment rules for stock splits, stock dividends, and inherited vs. gifted securities
4. Memorize the key IRA/Roth IRA age thresholds: 59½ (penalty-free distributions), 73 (RMD age under SECURE 2.0)
5. Work through at least 40 tax-related practice questions

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How to Allocate Your Study Time Based on Exam Weights

Use this table as a guide. Total assumes 150 study hours, which is the median for successful first-time passers:

Notice the pattern: Options alone should consume about a quarter of your total study time. This is not an exaggeration. Options are the single largest determinant of pass/fail on the Series 7.

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The 80%+ Practice Exam Benchmark

One of the strongest predictors of Series 7 success is your practice exam score. Here is what the data shows:

Our recommendation: Do not schedule your real exam until you have scored 80% or higher on at least three consecutive full-length (125-question) timed practice exams. This gives you a buffer for exam-day nerves, unfamiliar question phrasing, and the five unscored questions that may be harder than expected.

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Connecting the SIE and Series 7

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If you have already passed the SIE, you have a head start — about 20-30% of Series 7 content overlaps with SIE material. Focus your Series 7 study on the deeper, applied topics that the SIE only touches on: options strategies, margin calculations, muni bond details, and suitability analysis.

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Your Series 7 Study Plan: Putting It All Together

Based on everything above, here is a high-level 10-week plan:

Weeks 1-2: Foundation

• Equity securities, market structure, IPOs
• Start options basics (four basic positions only)
• Function 1 (communications rules) — knock it out early

Weeks 3-4: Debt & Munis

• Corporate bonds, government securities, agency bonds
• Municipal bonds deep dive (GO vs. revenue, tax-equivalent yield)
• Function 2 (account opening, CIP, account types)

Weeks 5-6: Options Intensive

• Covered calls, protective puts, collars
• Spreads (bull, bear, debit, credit) — T-chart method
• Straddles, combinations, hedging strategies
• 200+ options-only practice questions

Weeks 7-8: Products, Tax, and Suitability

• Mutual funds, ETFs, variable annuities, 529 plans
• DPPs and REITs
• Tax consequences (capital gains, wash sales, cost basis)
• Suitability and Reg BI scenario practice

Weeks 9-10: Integration & Practice Exams

• Margin account calculations
• Function 4 (order types, settlement, good delivery)
• Full-length timed practice exams (target 80%+)
• AI-assisted review of weak areas

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Start Preparing Today

The Series 7 is a challenging exam, but it is also a highly structured one. The topics and weights are published by FINRA, the question format never changes, and the passing score is fixed at 72%. There are no surprises — only preparation or the lack of it.

Free Series 7 Resources on OpenExamPrep

• 800+ free Series 7 practice questions with AI-powered explanations
• Series 7 exam overview and study guide
• Free SIE practice questions (prerequisite exam)
• Securities terms glossary for quick reference

Use AI to Study Smarter

Every practice question on OpenExamPrep includes an "Ask AI" button. When you get a question wrong — or even when you get it right but want a deeper explanation — our AI tutor will break down the concept, walk through the calculation, and quiz you on related topics. It is like having a private tutor available 24/7.

The candidates who pass the Series 7 are not necessarily the smartest — they are the ones who put in consistent, focused preparation on the right topics. Now you know exactly what those topics are.

Good luck with your Series 7 exam!